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THE  NEW  YORK  STOCK 

EXCHANGE 


Volume  I 


. 


I 


THE  NEW  STOCK  EXCHANGE 

OPENED  WITH  DEDICATORY  CEREMONIES  ON  APRIL  22  IP  1903 


THE 


NEW  YORK  STOCK  EXCHANGE 


ITS  HISTORY,  ITS  CONTRIBUTION  TO  NATIONAL  PROS¬ 
PERITY,  AND  ITS  RELATION  TO  AMERICAN  FINANCE 
AT  THE  OUTSET  OF  THE  TWENTIETH  CENTURY 


EDMUND  CLARENCE  STEDMAN 

EDITOR 


ASSISTANT  EDITOR 

ALEXANDER  N.  EASTON 


OFFICE  MANAGER 

W.  J.  FAIRMAN 


BIOGRAPHICAL  EDITOR 

B.  B.  VALLENTINE 


ART  EDITOR 

OTTO  H.  BACHER 


SPECIAL  CONTRIBUTORS 


MATTHEW  MARSxHALL  (Thomas  hitchcock) 
JOHN  RODEMEYER 
JOHN  GROSVENOR  WILSON 
HORACE  L.  HOTCHKISS 

MILTON  J.  PLATT 


JOHN  R.  DOS  PASSOS 
EMERSON  CHAMBERLIN 
HENRY  I.  JUDSON 
WILLIAM  F.  G.  SHANKS 


VOLUME  I 


NEW  YORK 

STOCK  EXCHANGE  HISTORICAL  COMPANY 


1905 


COPYRIGHT,  1905,  BY  THE 

STOCK  EXCHANGE  HISTORICAL  COMPANY 

ALL  RIGHTS  RESERVED 


PRESS  OP 

MAIL  AND  EXPRESS  JOB  PRINT 
NEW  YORK 


PREFACE 


[E  full^significance  of  such  an  institution  as  the  New  York 
Stock  Exchange, — which  is  to  other  exchanges  of  the 
continent  what  the  “Central”  office  is  to  a  metropolitan 
telephone  system, —  scarcely  can  be  realized  by  the  public, 
by  financiers  at  large,  or  even  by  the  alert  and  clear¬ 
headed  persons  constituting  its  membership.  Once  in  a  while  some  outside 
observer,  possessed  of  the  imaginative  faculty,  and  with  a  mind  broadened 
by  travel  and  reflection,  obtains  a  vivid  conception  of  its  functions 
and  import.  / 

The  present  writer  remembers  the  impression  left  upon  an  educated 
Englishman,  a  well-known  publicist,  who  made  a  visit  to  Wall  Street  some 
eighteen  years  ago.  He  had  been  taken  through  the  largest  commercial 
structures  in  the  vicinity,  and  even  to  the  Stock  Exchange  itself,  without 
giving  expression  to  unusual  interest.  But  on  returning  to  his  friend’s 
offices,  upon  the  upper  floor  of  a  building  in  the  rear  of  the  Exchange,  he 
saw  a  sight  that  instantly  gave  him  a  realization  of  the  extent  of  our  peo¬ 
pled  territory,  and  of  the  meaning  of  the  Stock  Exchange  as  the  focus  to 
which  all  currents  of  American  purpose  and  energy  converge.  It  was 
shortly  before  the  time  when  the  wires  of  New  York’s  electric  system  were 
buried,  by  enactment,  out  of  sight.  Through  the  air,  over  New  Street,  hun¬ 
dreds,  seemingly  thousands,  of  these  wires  stretched  toward  the  Exchange. 
No  bird  could  fly  through  their  network,  a  man  could  almost  walk  upon 


VI 


THE  NEW  YORK  STOCK  EXCHANGE 


them ;  in  fact,  they  darkened  the  street  and  the  windows  below  their  level. 
The  visitor’s  host  suggested  that  those  going  north,  west,  south  were 
carrying;  messages  to  and  from  scores  of  inland  cities  and  towns  —  financial 
ganglia  of  this  land  of  national  wealth  and  effort— names  of  which  were 
mentioned.  Certain  wires  were  transcontinental,  communicating  with  the 
towns  of  the  Pacific  States.  Others  served  the  uses  of  Montreal,  Toronto 
and  kindred  points  in  the  Great  Dominion.  Finally,  the  competing  ocean 
cables  were  of  course  laden  with  incessant  “arbitrage”  and  other  messages 
to  and  from  London,  Paris  and  Berlin.  This  ocular  demonstration  of  the 
relations  of  the  New  York  Exchange  to  the  Republic  in  its  entirety,  and 
even  to  the  world  overseas,  proved  almost  startling  to  the  English 
traveller.  He  asserted  that  within  this  central  field  of  financial  energy 
and  intercommunication  it  was  impossible  not  to  have  the  imagination 
aroused,  and  the  reason  convinced  of  the  enormous  interests  of  which 
Wall  Street,  through  its  representative  Exchange,  is  the  ceaseless  regu¬ 
lator.  With  philosophic  impartiality,  he  predicted  the  time  when  even  the 
largest  money  centres  of  the  old  world  would  become  more  or  less  sub¬ 
sidiary  to  this  dominant  market  of  the  Western  hemisphere. 

That  time  has  now  come,  and  well  in  advance  of  any  date  which  then 
suggested  itself  to  the  mind  of  either  the  writer  or  his  guest.  The  close 
of  the  Nineteenth  Century  found  those  rates  of  exchange  which  serve  to 
adjust  the  “balance  of  trade”  setting  in  favor  of  New  York,  our  financial 
metropolis.  It  found  Europe  looking  to  American  bankers  for  co-operation 
in  the  disposition  of  her  governmental  securities,  and  the  United  States 
quite  able,  if  need  be,  to  finance  their  own  public  and  private  bonds  and 
their  gigantic  constructive  enterprises,  without  foreign  assistance.  Coin- 
cidently  with  this  striking,  yet  foreordained,  reversal  of  the  conditions  that 
had  prevailed  throughout  its  recorded  experience,  the  New  York  Stock 
Exchange  easily  became,  at  least  for  the  time,  a  point  of  supreme  and 
universal  attention ;  an  arena  where  daily  operations  ran  up  to  millions  of 
shares  of  what  were  really  the  world’s  best  properties  for  trade  adventure 
and  for  investment.  It  is  readily  comprehended  that  upon  these  activities, 
under  our  present  civilization,  a  vast  portion  of  modern  industry  and 


PREFACE 


VII 


progress  depend.  To  give  the  history  of  the  rise  of  the  Exchange,  in 
the  course  of  a  few  generations,  from  its  modest  beginnings  to  such  a  pri¬ 
macy  is  the  general  purpose  of  this  work;  and  therewithal  to  exhibit 
the  reciprocating  processes  of  the  commercial  mechanism  which  the 
Exchange  regulates — to  show  how  sane  is  the  common  belief  in  the  dignity 
and  indispensability  of  its  functions. 

It  was  doubtless  with  an  instinct  for  the  fitness  of  things  that  the 
Governors  of  the  New  York  Stock  Exchange  decreed  that  the  long  post¬ 
poned  construction  of  a  new  edifice,  worthy  of  its  annals  and  distinction, 

% 

and  adequate  to  the  demands  of  the  new  era,  should  be  undertaken  at  the 
outset  of  the  Twentieth  Century,  as  if  in  tribute  to  the  past  and  in  antici¬ 
pation  of  a  commanding  future.  Both  the  time  and  the  event,  we  venture 
to  believe,  were  equally  auspicious  for  the  inception  of  the  work  now  set 
before  the  reader. 

Although  our  opening  train  of  thought  was  suggested  by  the  aspect 
of  the  Exchange  and  its  vicinage,  before  the  pressure  of  the  country 
upon  this  financial  centre  became  so  strenuous  that  fresh  bulwarks  were 
required  to  sustain  it,  how  much  more  impressive  is  the  scene  at 
the  dawn  of  a  greater  epoch.  The  cloud  of  wires  is  no  longer  visible, 
but  the  transformed  district  is  far  more  significant  of  national  wealth 
and  power.  On  its  streets  and  alleys,  not  so  long  ago,  there  were  relics 
of  the  old  time  insufficiency — low  musty  buildings  surviving  here  and 
there  that  gave  no  just  token  of  the  services  of  the  moneyed  Agamem- 
nons  of  their  past.  Above  these  towered  the  lofty  pioneers  of  the  struc¬ 
tures  which  now  make  Wall  Street’s  sky-line  boldly  emblematic,  alike  to 
the  stranger  and  to  the  familiar  observer.  Were  our  Briton,  after  a  look  up 
and  down  Broadway,  now  to  re-enter  the  district,  perhaps  through 
Liberty  Street  and  Nassau,  he  would  confront  such  a  panorama  of  civic 
wealth  and  mastery  as  exists  within  the  same  acreage  nowhere  else  in  the 
world.  Yes,  and  of  structural  splendor.  When  the  president  of  America’s 
ranking  University  recently  spoke  of  New  York  to  New  Yorkers,  and  said 
that  he  had  seen  nothing  but  the  squalor  and  ugliness  of  it  all,  he  plainly 
suffered  from  the  myopy  not  infrequent  with  justly  eminent  men  whose 


VIII 


THE  NEW  YORK  STOCK  EXCHANGE 


observation  has  been  long  and  closely  restricted  to  a  single  limited  field. 
Otherwise  he  would  have  obtained  a  synthetic  view  of  the  metropolis  upon 
its  enlarged  scale,  and  have  comprehended  a  temporary  phase  of  its 
evolution.  He  would  have  realized  how  the  city  has  been  compelled  once 
more  to  change  and  expand  its  framework,  and  he  might  have  been 
vouchsafed  an  imaginative  vision  of  what  the  readjustment  will  effect. 
Within  sound  of  Trinity  chimes  the  process  has  gone  on  with  fabulous 
speed,  passing  well  beyond  the  stage  of  manifest  incompleteness  —  although 
at  this  date,  the  entire  face  of  the  block  fronting  the  Exchange,  stately 
as  it  is,  may  not  unlikely  soon  give  way  to  imposing  reconstructions. 
Veteran  frequenters  of  the  Street  have  themselves  been  more  impressed, 
upon  returning  from  foreign  tours  or  summer  vacations,  than  if  they  were 
strangers,  as  they  have  marked  the  surprising  changes  in  Nassau,  Pine, 
Wall  and  Broad  Streets,  and  Exchange  Place.  The  architecture,  that  came 
into  life  with  the  inventions  of  the  elevator  and  the  iron  building  frame, 
has  passed  through  its  successive  periods  of  opposition,  acceptance  and 
admiration.  For  it  has  at  length  developed  novel  beauties  of  its  own,  fully 
recognized  by  transatlantic  craftsmen,  and  even  the  censors  who  at  first 
mocked  at  the  “canyons”  of  lower  Manhattan  now  confess  that  in  our 
sunlit  and  exhilarating  local  atmosphere  more  light  and  better  air  pene¬ 
trate  to  the  ground  stories  of  the  Wall  Street  district  than  are  obtainable 
on  the  top-floors  of  London’s  “City.”  At  intervals,  nevertheless,  along 
the  blocks  of  towering  edifices  are  costly  and  massive  buildings,  low  in 
height,  and  conspicuous  for  their  adherence  to  classic  and  historic  outlines, 
such  as  the  Chamber  of  Commerce,  the  New  York  Clearing  House,  the  fine 
old  Doric  Treasury  —  which  need  ask  no  odds  of  its  latter-day  rivals,  the 
princely  banking  houses  of  certain  private  bankers,  and  finally,  the  new 
Stock  Exchange  itself — the  centre,  and  in  the  belief  of  its  constructors,  the 
paragon  of  the  whole  composition. 

The  claim  is  not  without  justification  that  this  beautiful  and  enduring 
citadel  of  financial  activity  is  fairly  proportioned  to  the  new  wealth  and 
sovereignty  of  the  American  people  at  large.  Yet  it  must  be  acknowledged 
that  our  elder  “cliff-dwellers”  and  their  former  associates— those  of 


PREFACE 


IX 


whom  it  may  be  said  that  the  places  which  once  knew  them  now  know  them 
no  more — were  themselves  lacking  in  true  prophetic  vision,  but  a  few 
decades  ago.  They  failed  to  avail  themselves  of  successive  opportunities 
to  enlarge  the  area  of  the  ground  belonging  to  the  Exchange,  when 
adjacent  property  could  have  been  obtained  for  a  song — as  compared  with 
its  present  value.  It  is  believed  that  an  entire  block  was  at  one  time  prac¬ 
tically  subject  to  their  option,  for  a  sum  far  smaller  than  the  assets  of 
many  a  corporation  that  has  been  dealt  in  on  the  “  Floor  ”  though  capital¬ 
ized  for  quadruple  its  actual  resources.  Tull  appreciation  should  be 
awarded  to  the  unwillingness  of  those  former  Governors  of  the  Exchange  to 
subject  their  institution  to  speculative  obligations,  but  time  has  again 
demonstrated  that  sane  financial  genius  must  display  ordinary  enterprise 
no  less  than  a  wholesome  conservatism. 

The  present  work  was  undertaken  in  the  conviction  that  at  this  date, 
when  the  commencement  of  a  fresh  epoch  had  been  signalized  by  the  erection 
of  a  new  Exchange,  a  timely  record  should  be  made  of  the  stages  where¬ 
through  the  conditions  of  which  that  structure  is  the  visible  emblem  have 
been  evolved.  An  effort  to  make  the  narrative  complete  would  still  further 
delay  this  publication.  Financial  readjustments  succeed  one  another  so 
rapidly  that  a  chronicler  fails  to  keep  pace  with  them.  But  the  story  of  a 
century  can  be  told  in  such  wise  as  to  include  its  chief  events  and  phrases. 
As  to  the  personages  involved,  it  will  be  seen  that  the  bankers,  brokers, 
captains  of  industry,  corporations,  figuring  within  these  volumes — histori¬ 
cally  or  biographically — are  thoroughly  representative.  Their  records, 
and  the  vicissitudes  and  achievements  of  the  Exchange,  constitute  a  drama 
not  hitherto  set  forth  upon  the  present  scale.  An  admirable  basis  for  its 
production,  notable  for  the  painstaking  with  which  the  author  had  brought 
to  light  his  material,  was  compiled,  and  printed  in  an  elegant  limited 
edition,  A.  D.,  1894,  by  Mr.  Francis  L.  Eames,  then  President  of  the 
Exchange,  and  through  four  administrations  one  of  the  worthiest  chief  offi¬ 
cers  the  Institution  has  ever  possessed.  From  our  chapter  upon  the  Stock 
Exchange  Clearing  House  it  can  be  understood  how  much  the  conception 
and  inauguration  of  that  now  indispensable  adjunct  to  the  mechanism  of 


X 


THE  NEW  YORK  STOCK  EXCHANGE 


the  Exchange  derived  from  his  constructive  genius.  Acknowledgment  is  in 
every  way  due,  from  writers  who  have  been  guided  along  not  a  few  impor¬ 
tant  paths  by  the  footprints  of  their  pioneer,  to  President  Eames’s 
scholarly  explorations.  The  present  history,  upon  a  somewhat  inclusive 
scale,  concerns  itself  not  only  with  the  records  of  the  Exchange  itself,  but 
with  national  events  in  their  relation  to  the  generations  that  come  and  go 
where  the  surging  currents  of  Wall  Street’s  fortune-freighted  stream  flow 
“on  forever.” 

In  so  far  as  the  writers  of  the  History  which  occupies  the  major  portion 
of  our  opening  volume  have  referred  to  unchanging  economic  laws,  it  is 
hoped  that  they  will  not  be  thought  largely  in  error  or  without  a  certain 
conscientiousness.  ’  The  test  of  this  must  lie  in  the  moral  drawn  from  the 
effects  of  undue  inflation,  such  as  that  which  has  followed  great  issues  of 
paper  money  unsupported  by  stable  gold  reserves ;  from  recurring  suspen¬ 
sions  of  specie  payment  in  the  past  century ;  from  the  perilous  era  of  silver 
inflation ;  from  over-construction  and  reckless  promotion  at  several  periods 
of  national  exhilaration,  and  the  habitually  redundant  issue  of  “  securities  ” 
to  represent  the  properties  involved ;  and,  finally,  from  the  market  specula¬ 
tion  engendered  by  those  engaged  in  such  construction  and  promotion,  and 
by  the  very  method  of  capitalizing  new  enterprises  which  has  been  accepted 
as  necessary  to  expedite  the  country’s  development.  It  has  been  the  effort 
of  the  writers,  without  assuming  any  credit  for  what  are  obvious  first  prin¬ 
ciples,  to  touch  here  and  there  upon  the  philosophy  which  their  History 
teaches  “by  example.”  One  lesson,  at  least,  is  unreservedly  impressed  — 
that  the  soundness  of  finance  depends  simply  upon  public  and  private 
honesty,  upon  the  manful  recognition  of  national,  corporate,  private  and 
traditional  obligations.  Contracts  between  man  and  man  doubtlessly  are 
enforced  more  rigidly  in  the  world’s  money  centres  than  elsewhere.  Wall 
Street  also  has  been  more  sensitive,  as  regards  the  national  credit,  than 
has  the  public  at  large;  but  with  relation  to  corporation  economics,  our 
brokers  and  financiers,  in  the  direction  where  temptation  necessarily  most 
besets  them,  have  been  proverbially  lenient.  Even  this  may  fairly  be 
attributed  less  to  self-seeking  than  to  an  instinctive  perception  that  the 


PREFACE 


XI 


exploitation  of  a  new  continent  involves  some  discount  of  the  future. 
Credit  until  recently  has  had  to  do  the  work  of  capital.  Moreover,  in  the 
growth  of  no  other  land  has  it  been  so  verified  that  the  Lord  maketh  the 
wrath  of  man  to  praise  Him.  System  after  system  of  American  railways, 
built  chiefly  on  credit,  if  not  conceived  in  sin  and  born  in  iniquity,  has  in  its 
turn — within  each  of  our  territorial  standard -time  divisions — passed 
through  stages  of  liquidation  and  reorganization  to  the  dividend-paying 
solvency  of  a  capitalization  greater  than  the  stock  and  bond  issues  which 
brought  distress  upon  original  investors.  It  is  truthfully  declared  that 
although  American  railways  are  now  capitalized  at  the  enormous  total  of 
nearly  thirteen  billions  of  dollars,  they  are  not  overcapitalized,  inasmuch 
as  they  could  not  be  duplicated  for  the  aggregate  amount  of  their  stocks 
and  funded  debt. 

|  With  each  decade  new  problems  arise.  Coincidently  with  the  prepara¬ 
tion  of  this  work,  our  vast  industrial  combinations,  devised  as  it  might 
seem  in  the  very  spirit  of  the  earliest  socialistic  dreamers,  are  being  tested 
on  the  whole  so  successfully  that,  despite  their  obvious  defects,  a  new 
generation  already  accepts  them  as  a  part  of  the  established  order./ 

Our  historical  narrative  would  be  far  from  complete  without  the 
correlated  articles  upon  the  New  Exchange,  the  Stock  Exchange  Clearing 
House,  the  Loan  Market,  Unlisted  Securities,  and  Municipal  Bonds,  pre¬ 
pared  by  acknowledged  experts,  several  of  whom  are  prominently  active  in 
the  Street.  The  learned  treatise  upon  Stock  Exchange  Law  by  Mr.  Dos 
Passos,  who  was  so  long  the  counsel  of  the  Exchange,  may  justly  be  termed 
authoritative.  To  its  author,  and  to  Messrs.  Rodemeyer,  Wilson,  Cham¬ 
berlin,  Judson,  Hotchkiss,  and  the  late  Mr.  W.  F.  Shanks,  the  projectors  and 
the  editor  of  this  work  are  gratefully  indebted.  Mr.  Thomas  Hitchcock, 
Matthew  Marshall’s,  chapter  on  the  Functions  of  the  Stock  Exchange  is  a 
masterly  discussion,  void  of  fallacy  and  prejudice,  by  one  long  recognized 
as  our  most  philosophical  observer  of  financial  events. 

The  existing  Constitution  of  the  Exchange  is  included,  for  reference  now 
and  in  time  to  come,  and  a  chapter  of  Annals  and  Statistics,  compiled  by 
that  trustworthy  statistician,  Mr.  Milton  J.  Platt,  clearly  shows  the  growth 


XII 


THE  NEW  YORK  STOCK  EXCHANGE 


of  local  and  national  resources  since  the  date  when  Wall  Street  attained 
such  potency  at  the  outbreak  of  the  Civil  War. 

The  pen  and  ink  sketches  of  scenes  and  buildings  in  the  Wall  Street 
district,  as  well  as  some  of  the  portraits  illustrating  our  main  narration, 
are  from  the  hand  of  Mr.  Otto  H.  Bacher,  whom  the  publishers  of  this  work 
were  so  fortunate  as  to  secure  as  its  Art  Editor.  The  demands  for  Mr. 
Bacher’s  contributions,  made  by  our  foremost  magazine  and  book  publishers, 
testify  to  his  rank  among  American  painters  and  draughtsmen.  It  shouid 
be  mentioned  that  the  artistic  photogravure  of  the  New  Exchange,  which 
constitutes  the  frontispiece  of  Volume  One,  is  from  a  choice  negative  kindly 
lent  by  its  maker  and  possessor,  Mr.  Harry  Coutant. 

For  the  typographical  beauty  and  dignity  of  these  volumes,  due  credit 
must  be  awarded  to  the  Mail  and  Express  Job  Print,  which  undertook  their 
manufacture  with  an  avowed  intent  to  produce  a  fine  specimen  of  handi¬ 
work  as  an  example  of  results  from  orders  entrusted  to  its  care.  Our 
special  thanks  are  extended  to  Mr.  George  E.  McConnell,  the  experienced 
manager  of  that  establishment,  for  his  skilled  and  friendly  professional 
supervision,  from  first  to  last,  of  the  typography,  illustrating,  proof- 
correcting  and  other  practical  details  of  construction. 

While  this  work  is  an  independent  enterprise,  and  in  no  respect  an 
exception  to  the  wisely  invariable  rule  of  the  Stock  Exchange  against  the 
endorsement  of  unofficial  publications,  its  managers  gladly  acknowledge 

their  indebtedness  to  various  officers  and  leading  members  of  the  Board  for 

§ 

unstinted  advice  and  aid  given  in  their  individual  capacities.  Information 
has  always  been  at  command,  illustrations  have  been  supplied  by  various 
members,  and  with  few  exceptions  our  work  has  been  sustained  by  the  good 
will  and  practical  encouragement  of  those  with  whom  its  editor-in-chief  was 
so  long  a  daily  associate.  Without  the  co-operation  of  the  Board  members 
the  costly  limited  edition  now  issuing  could  not  have  been  published.  On 
the  part  of  the  publishers,  it  may  properly  be  disclosed  that  the  terms  of 
subscription  were  placed  on  the  lowest  basis  that  would  cover  the  outlay 
involved;  in  addition,  the  labors  which  have  deferred  its  completion 
beyond  the  expectation  of  all  concerned  have  rendered  it  anything  but  a 


PREFACE 


XIII 


product  of  commercialism.  It  has  been  steadily  prosecuted,  none  the  le§s, 
in  maintenance  of  the  good  faith  of  its  projectors,  and  with  an  abiding 
confidence  in  its  value  as  a  commemorative  and  historical  record  to  both 
the  present  and  the  future. 

E.  C.  S. 

September,  A.  D.  1905. 


CONTENTS  OF  VOLUME  ONE 


Frontispiece  .  The  New  York  Stock  Exchange  Facing  Title  Page 
Preface . . The  Editor-in-Chief 


THE  NEW  YORK  STOCK  EXCHANGE 


I 


The  Functions  of  the  Stock  Exchange 


Matthew  Marshall 
( Thomas  G.  Hitchcock) 


PAGE 

5 


History  of  the  New  York  Stock  Exchange 


E.  C.  Stedman  and 
A.  N.  Easton 


15 


CHAPTER  I 


Early  Days  in  Manhattan . 17 

Vigor  of  American  Institutions,  17 ;  causes  of  the  rise  and  growth  of  the  Exchange,  18 ; 
Manhattan  under  the  early  Dutch,  19 ;  Penal  Severity,  20 ;  Building  of  the  Wall  to  keep 
out  the  English,  21 ;  Wampum,  or  Seawant,  Currency,  22 ;  the  First  “  Corner,”  23 ;  Man¬ 
hattan  Island  ceded  to  England  (A.  D.  1674),  24;  New  York’s  First  Charter,  25;  Survey 
of  Wall  Street’s  Northerly  Line,  25;  removal  of  the  Wall,  and  building  of  a  new  City 
Hall,  27;  Taxation,  Building,  Cost  of  Living,  Punishments,  etc.,  28;  early  Municipal 
Revenues,  28 ;  the  Zenger  Trial,  29. 

Illustrations:— Section  of  the  City  Wall  (1653),  20;  View  of  Water  Gate,  21;  Wampum- 
peague,  or  Seawant,  22 ;  Dock  and  River  Front  to  Wall  Street  (1667),  23 ;  Old  City  Hall, 

Wall  Street,  before  the  Revolution,  25;  Stadthuys,  26. 


XVI 


THE  NEW  YORK  STOCK  EXCHANGE 


CHAPTER  II  PAGE 

Genesis  of  the  New  York  Stock  Market . 30 

The  pre-Revolutionary  Period,  30 ;  the  City’s  First  Bonds,  Municipal  Lotteries,  etc. ,  30 ; 
the  Stamp  Act,  31 ;  a  stormy  scene  in  Trinity  Church,  30 ;  Revolution  and  Independence, 

31;  luxury  and  gaiety  in  Wall  Street,  32;  effects  of  the  Paper  Currency  issue,  32;  Old 
Tenor,  New  Tenor,  and  Currency  evils,  33 ;  financial  chaos,  33 ;  the  Federal  Government 
removed  to  Philadelphia,  34;  the  Government  Securities  create  need  of  a  Stock 
Exchange,  35;  First  National  Loan,  35;  earliest  Organization  of  the  Brokers  (March 
1792),  35;  their  Written  Compact  and  its  Signatories,  36;  an  early  Quotation  List, 

37 ;  the  First  Merchant’s  Exchange,  37 ;  evolution  of  the  Broker  from  the  Middleman, 

37,  38 ;  Brokerage  in  England,  38,  39 ;  Eighteenth  Century  Speculation,  39 ;  London 
“Bulls”  and  “Bears,”  40;  the  Paris  Bourse,  41 ;  Agents  de  Change,  41;  our  own  Stock 
Exchange  prior  to  1817,  42 ;  adoption  of  the  American  Dollar,  42,  43 ;  the  Philadelphia 
Mint,  43. 

Illustrations: — View  of  the  Great  Dock  (1746),  30;  Meal  and  Slave  Market,  Footof  Wall 
Street,  31;  City  Hall,  Wall  Street,  as  enlarged  for  the  Capitol,  32 ;  Inserted  Plate  — Colonial, 
“Continental,”  and  State  Currency,  facing  Page  33;  Old  Royal  Exchange  (1752),  Foot 
of  Broad  Street,  34;  Tontine  Coffee  House,  Wall  Street  (1797),  37 ;  First  United  States 
Dollar,  43. 


CHAPTER  III 

The  Pioneer  Banks  of  the  Nation . 44 

Early  Banks  a  subject  of  controversy,  44;  Jefferson’s  theory  in  opposition,  45; 
Hamilton  and  Burr,  45;  Bank  of  New  York  established  (1784)  in  Wall  Street,  45; 
National  Recuperation,  46;  Immigration  sets  in,  46;  Morris  and  Hamilton  restore 
credit,  47 ;  Paper  Currency  and  Taxation,  48 ;  Hamilton’s  genius  and  achievements,  49 ; 

Public  Debt  funded  at  par,  50;  Jefferson’s  opposition,  50;  Redemption  Bill  of  1790,  51; 
rivalry  of  Hamilton  and  Burr,  51 ;  Burr’s  Manhattan  Company  chartered,  52 ;  charters 
obtained  by  Merchants’  Bank,  the  Mechanics’,  Bank  of  America,  and  City  Bank,  52 ;  First 
Bank  of  the  United  States,  52,  53;  War  of  1812,  54;  early  Banking  Abuses,  54;  con¬ 
ditions  in  1818-28,  55;  John  White’s  Report,  1822,  55;  the  Louisiana  Purchase,  56. 

Illustrations:  — Wall  Street,  1800,  46;  Federal  Hall  and  Broad  Street,  1796,  49. 


CHAPTER  IV 

A  New  Market  and  the  First  Constitution . 57 

Development  of  the  New  York  Stock  and  Exchange  Board  from  the  commercial  revival  after 
War  of  1812, 57 ;  increase  of  Population,  58 ;  conquest  of  the  West,  59 ;  Jefferson  reduces 
the  Public  Debt,  60;  the  Embargo  Act  (1807),  61;  alarming  regrowth  of  the  Public 
Debt  (1816),  62 ;  Meeting  of  the  Stock  Brokers,  February  25,  1817,  for  Organization  of  the 
Present  Exchange,  62,  63;  “Constitution  of  the  New  York  Stock  Exchange  Board, 

1817,”  63-66;  discovery  in  1900  of  the  Original  Manuscript  Record,  63;  Meeting-Room 
rented,  66 ;  the  Constitution  Revised  (February  21, 1820),  66 ;  provision  for  Time  Con¬ 
tracts,  67;  new  By-laws,  etc.,  68;  prominent  Members  and  Officers  of  the  Board,  69; 
successive  Migrations  of  the  Board  to  Washington  Hall,  the  Protection  Fire  Co.  Building, 

“Mr.  Warren’s  Room,”  and  to  the  Merchants’  Exchange,  69,  70. 

Illustrations:— Inserted  Plate — Facsimile  of  Page  1  of  the  Constitution  of  1817, 
facing  Page  64;  Washington  Hall,  corner  of  Reade  Street,  69;  Merchants’  Exchange, 

Wall  and  Hanover  Streets,  70. 


CONTENTS  OF  VOLUME  ONE 


XVII 


CHAPTER  V  PAGE 

The  Crisis  op  1818  . . 71 


National  Over-confidence  and  Extravagances,  71;  lavish  Imports  of  Foreign  Goods,  72; 
Brougham’s  Speech  in  the  Commons,  72;  the  Tariff  of  1816  adopted  as  a  cure,  73; 
American  Shipping  excluded  from  the  West  Indies,  73;  Monroe,  and  the  “Era  of  Good 
Feeling”,  74;  inception  of  the  Erie  Canal,  74;  Jackson  attacked  by  Clay,  75;  Secretary 
Dallas  proposes  a  National  Bank,  75;  the  Second  Bank  of  the  United  States,  75,  76; 
speculation  in  its  Shares,  76;  Panic  of  1818-19,  77;  clamor  against  the  Bank  of  the 
United  States,  78;  “Short”, Sales  legislated  against  in  1830,  and  legalized  in  1858,  79; 
rise  of  new  Manufactures,  79;  many  Patents  granted,  80;  enormous  Auction  Sales  of 
Imported  Goods,  80 ;  Tariff  Duties  increased,  1824-28,  80,  81 ;  Purchase  of  Florida  and 
Cession  of  Texas,  81 ;  promulgation  (1823)  of  the  Monroe  Doctrine,  82 ;  the  Missouri 
Compromise,  82 ;  founding  (1821)  of  the  Colony  of  Liberia,  83. 


CHAPTER  VI 


An  Era  of  Expansion  and  Strife  . . 84 

A  Day’s  Business  in  1830,  85 :  First  Steam  Carriage  and  First  American  Railroad,  85,  86 ; 

“Tom  Thumb”,  Peter  Cooper’s  Engine,  86;  First  Railroad  Securities  on  the  Stock 
Exchange,  87;  spread  of  Railroad  building,  87;  Mileage,  etc.,  1831-1840,  88;  the 
Jackson-Clay  feud,  89;  Jackson’s  attack  upon  the  United  States  Bank,  90,  etseq.;  the 
President’s  evil  advisers,  90;  Clay  takes  up  the  Bank’s  cause,  91;  Nicholas  Biddle,  91; 
Clayton  predicts  disaster,  92;  removal  of  the  Government  Deposits,  92;  Land  Specula¬ 
tions,  93;  growth  of  our  Municipal  Finances,  93,  94;  City  Bond  Issues,  94;  Jackson  issues 
the  Specie  Circular,  95;  distribution  of  the  Surplus  from  Land  Sales,  to  the  States,  and 
consequent  Suspension  of  the  Banks,  95;  a  general  crash,  96;  Banks  unable  to  prevent 
the  crisis,  96;  Wall  Street  Brokers  meet  in  the  “Hay  Loft”, after  the  Great  Fire  of  Decem¬ 
ber  16,  1835,  96;  a  Day’s  Transactions  in  1837,  97 ;  Quotations  of  May  9th  and  10th, 

1835,  98;  failure  of  J.  L.  &  S.  Josephs,  etc.,  98;  rancor  against  the  Party  in  power,  99; 
fate  of  Nicholas  Biddle,  99. 

Illustrations:  — Andrew  Jackson  in  1845,  89;  Nicholas  Biddle,  91;  Ruins  of  the 
Merchants’  Exchange,  after  the  Fire  of  1835,  99. 


CHAPTER  VII 

From  Jackson’s  Day  to  the  Civil  War . 100 

Jacob  Little,  First  Speculative  King,  100,  102 ;  his  appetite  for  Securities,  101 ;  his  fam¬ 
ous  Coup  in  Erie,  102;  one  of  his  “  Corners,”  102 ;  the  Board  declines  to  buy  a  site  for  the 
Exchange,  103;  rival  organization  attempted,  103;  New  Merchant’s  Exchange,  104; 
the  Board  migrates  thither  in  1842,  104 ;  rise  of  the  Astors,  105 ;  the  New  York  Sun's  List 
of  Rich  Property  Owners,  106, 108;  new  forces  in  the  National  growth,  109;  the  Mexican 
War,  109,  110;  invention  of  the  Telegraph,  110;  discovery  of  Gold  in  California,  and 
rush  of  the  “Forty-Niners,”  111;  speculation  stimulated,  111;  establishment  of  the  New 
York  Clearing  House,  1853,  112;  sudden  increase  of  Railway  Construction  (1849-56), 

113 ;  the  Schuyler  over-issue  of  N.  Y.  &  N.  H.  Stocks,  113 ;  Stock  Exchange  moves  to  Corn 
Exchange  Bank  and  then  to  Lord’s  Court,  114 ;  Mr.  Little’s  third  and  fourth  failures, 

114,  115;  collapse  of  the  Ohio  Life  and  Trust  Co.,  115;  the  ensuing  Panic  of  1857,  116- 
118;  its  underlying  causes,  118. 

Illustrations  :  —  Jacob  Little,  101 ;  New  Merchant’s  Exchange,  1842,  Present  Custom 
House,  104  ;  Stock  Room  in  the  Merchant’s  Exchange,  1851,  112;  Corn  Exchange  Bank 
Building,  1854, 114. 


XVIII 


THE  NEW  YORK  STOCK  EXCHANGE 


CHAPTER  VIII 


Secession 


PAGE 

119 


Chief  phases  in  the  Sixties,  119,  120;  a  Decade  of  great  speculative  importance,  121;  causes 
of  antagonism  between  North  and  South,  121;  the  State  Rights  issue,  122;  Climate 
and  Slavery,  122;  Slave-holding  by  “Divine  Right,”  123;  the  Dred  Scott  Decision,  123; 
the  John  Brown  Raid,  123;  Oil  struck  at  Titusville  (1859),  124;  Mining  Stock 
speculation,  124;  rise  of  Vanderbilt  and  of  Drew,  125;  the  Republican  Platform,  126; 
Lincoln’s  Election  followed  by  a  Panic,  127;  First  Issue  (November,  1860)  of  Clearing 
House  Certificates,  128;  a  gloomy  December,  128;  South  Carolina  secedes,  129;  six 
other  States  Follow,  129;  Davis  becomes  President  of  the  Confederacy,  129;  attack  on 
Fort  Sumter,  and  bloodshed  at  Baltimore,  130;  first  effect  of  actual  War,  131;  Prices 
on  April  12  and  13  (1861),  131. 

Illustrations  :  —  Stock  Exchange  Floor,  Lord’s  Court,  1862,  120 ;  Cornelius  Vanderbilt, 
126. 


CHAPTER  IX 


Legal  Tenders . 132 

Speculation  in  Government  Notes,  132 ;  uses  of  the  Gold  Room,  133 ;  the  conflict  under¬ 
estimated  on  both  sides,  133;  fall  in  U.  S.  Bonds,  134;  $250,000,000  Additional 
Loans  authorized,  134;  Secretary  Chase  consults  New  York  Bankers,  135;  the  Banks 
come  to  the  rescue,  135 ;  the  Secretary  differs  with  them,  136 ;  his  mistakes  and  theirs, 

137 ;  the  Currency  Notes  and  Coin  Reserve,  137 ;  Banks  forced  to  suspend  Specie 
Payment,  138;  friction  with  England,  138;  the  Legal  Tender  policy,  138-140;  War 
Taxation,  139;  patriotic  services  of  the  Banks,  141;  depreciation  of  the  “Greenbacks,” 

141, 142;  unfair  working  of  the  altered  Standard  of  Value,  142;  establishment  of  the 
National  Banking  System,  143. 

Illustrations  Inserted  Plate  — Copper  Tokens,  facing  Page  134;  Salmon  P.  Chase, 

140;  Inserted  Plate  — Shinplasters,  facing  Page  142, 


CHAPTER  X 


Trading  in  Gold . 144 

The  Exchange’s  loyal  attitude  in  War  Time,  144;  adoption  of  the  Eighth  of  One  Per 
Cent.  Commission  Rule,  145;  the  Board  Room  in  1861,  145;  “Goodwin’s  Room,”  146; 

The  William  Street  Open  Market,  146;  the  Exchange  adopts  its  present  name,  147;  a 
rush  of  speculation,  148;  the  First  Premium  for  Gold,  148;  The  “Coal  Hole,”  or  Public 
Stock  Board,  149;  “Gilpin’s  Room,”  149;  Nature  and  Conditions  of  Gold  Speculation, 

149;  Labor  suffers  through  the  Greenback  depreciation,  150;  War  as  the  “Advance 
Agent  ”  of  Prosperity,  150;  the  “Underground  Railroad”  business,  151;  Washington 
sources  of  information,  151;  Mr.  Chase’s  sales  of  Gold,  151;  Congress’s  vain  effort  to 
control  the  Gold  Market,  152;  Gold  at  310  (July  11th),  152  ;  organization  of  the  Gold 
Exchange,  153,  Noted  Operators,  153;  Bank  of  New  York  Gold  Cheeque,  153;  the 
Government  Tax  on  Gold  Sales,  154;  the  Gold  Exchange’s  New  and  Broad  Street 
Premises,  154. 

Illustration:— Inserted  Plate  —  Tickets  used  by  Local  Tradesmen,  facing  Page  150. 


CONTENTS  OF  VOLUME  ONE 


XIX 


CHAPTER  XI 


PAGE 


Phases  of  War-Time  Speculation  . . 155 


The  Open  Board  of  Stock  Brokers,  155 ;  it  admits  the  Public  to  its  quarters,  16  and  18 
Broad  Street,  156 ;  migration  of  the  New  York  Stock  Exchange  to  10  and  12  Broad  Street, 
(December,  9, 1865),  157 ;  the  “  Long  Room  ”  and  the  Government  Bond  Department,  158 ; 
revival  of  the  Mining  Share  Market,  158;  formation  of  the  Petroleum  Board,  159; 
speculation  in  Petroleum  Stocks,  159;  Oil  and  Mining  Brokers  unite  in  the  “Petroleum  and 
Mining  Board,”  159;  its  Rise  and  Decline,  160;  a  Broker’s  arduous  Life  in  the  Sixties,  160 ; 
Night  Trading  at  the  Fifth  Avenue  Hotel,  161;  Gallagher’s  Evening  Exchange,  161; 
Assassination  of  President  Lincoln,  162;  Enormous  Dealings  in  1865,  162;  scenes  at 
the  Evening  Exchange,  163;  the  Ketchum  Forgeries,  164;  Horace  White’s  description 
of  the  Gold  Room,  165,  166 ;  the  Gold  Exchange  Bank  organized  to  clear  Gold  Trans¬ 
actions,  166. 

Illustrations  :  —  New  York  Stock  Exchange;  Open  Board  of  Stock  Brokers,  157. 


CHAPTER  XII 


Three  Notable  Corners  . . 168 

Vanderbilt’s  marvellous  career,  168;  his  capacity,  169;  his  gift  of  the  “Vanderbilt”  to 
the  Government,  169;  Vanderbilt  and  Drew  enter  the  Railroad  field  together,  170; 
traits  of  Drew,  171;  he  originates  “Stock  Watering,”  171 ;  runs  opposition  to  Vander¬ 
bilt  in  Hudson  River  Steamboating,  172;  becomes  a  large  creditor  of  the  Erie  Railroad, 

172;  Vanderbilt  buys  Erie  and  Harlem,  173;  Congressman  Stebbins  elected  President  of 
the  Stock  Exchange,  173;  fight  over  the  Street  Car  Franchise,  173;  Vanderbilt 
gains  it  for  the  Harlem  R.  R.,  174;  becomes  President  of  Harlem,  174;  the  Common 
Council  repeals  the  Street-Car  Grant,  175;  the  Shorts  in  Harlem  “cornered”  by  the 
Commodore,  176;  the  Hudson  River  R.  R.  “Corner,”  176-178;  the  Second  Harlem 
“Corner”  (1864),  178-181;  John  M.  Tobin  179;  a  story  of  William  H.  Vanderbilt,  181. 


CHAPTER  XIII 


Some  Market  Battles  of  the  Sixties . .  182 

Fluctuations  in  W7ar  times,  182;  range  of  Prices  (1861-66),  183;  A.  W.  Morse,  184, 

185 ;  Samuel  Hallett  and  Gen.  Fremont  begin  the  First  Pacific  Railway,  186 ;  the  Morse 
Panic,  186;  Effect  of  War  vicissitudes  on  the  Gold  Market,  187;  W.  H.  Marston’s 
Prairie  du  Chien  “  Corner,”  188,  189 ;  the  Keep-Jerome  contest  in  Michigan  Southern, 
189-192;  Henry  Keep,  190;  Addison  G.  Jerome,  190;  Keep  reconstructs  the  Chicago 
and  North-Western  Railway,  192;  career  of  Leonard  W.  Jerome,  192;  Tight  Money  (in 
1866),  193 ;  tragic  death  of  the  President  of  the  Bank  of  North  America,  193 ;  Jerome’s 
loss  in  Pacific  Mail,  194;  William  R.  Travers,  194;  the  First  Atlantic  Cable,  laid  by 
Cyrus  W.  Field,  194, 195. 

Illustrations  Leonard  W.  Jerome,  193;  William  R.  Travers,  194. 


XX 


THE  NEW  YORK  STOCK  EXCHANGE 

CHAPTER  XIV 


PAGE 

First  Erie  Conflicts  of  1868  .  .  196 

Erie  ruined  by  its  Custodians,  196;  Drew  caught  in  Michigan  Southern,  197;  his 
speculations  in  Erie,  197 ;  the  British  “ Black  Friday”  (1866),  197 ;  Vanderbilt  has  New 
York  Central  and  covets  Erie,  198 ;  Erie  and  Michigan  Southern  Alliance  excites  a  stock 
conflict,  199;  Gould  and  Fisk  allied  with  Drew,  199;  strategic  issue  of  Erie  Stock,  200; 
the  Erie  Directors  between  two  fires,  201;  Drew  phalanx  successful,  202;  Frank 
Work,  202;  Fisk,  Belden  &  Co.,  203;  Drew  and  his  friends  flee  to  Jersey  City,  203; 

Judge  Bernard's  soiled  ermine,  204;  the  Directors’  Clique  seeks  Legislative  aid,  205; 
a  Vanderbilt  triumph,  206;  bribery  at  Albany,  207;  a  compromise,  207;  all  factions 
reconciled  and  the  Erie  Road  falls  to  Fisk  and  Gould,  208. 

Illustration  :  —  Daniel  Drew,  200. 


CHAPTER  XV 


Erie  Under  the  New  Control  .  . 209 

English  investors  interested,  209 ;  purchase  of  the  Opera  House,  209 ;  fresh  issues  of 
Erie  stock,  210;  Drew  bears  Erie,  210;  is  routed  and  sues  for  mercy,  211;  vainly  resorts 
to  legal  proceedings,  212;  covers  at  great  loss,  212;  Erie  Clique  retains  control,  213; 
Vanderbilt’s  Scrip  Dividend  (80  per  cent.)  on  New  York  Central,  213;  the  National  (Erie) 

Stock  Exchange,  214;  Merger  of  the  “Open  Board  of  Brokers ”  and  “Government  Bond 
Department  ”  with  the  New  York  Stock  Exchange  (May,  1869),  214;  the  Gold  Corner  of 
September,  1869,  215;  Merchants  forced  to  keep  short  of  Gold,  215;  Gould’s  theory 
that  Gold  should  advance,  216;  enlists  Corbin  to  obtain  President  Grant's  approval, 

217;  apparent  success,  218;  the  Gold  Pool  formed,  218;  Fisk  admitted  thereto,  219; 
characterization  of  Fisk,  219;  Gould  and  Fisk  hasten  the  scheme,  220;  Corbin  backs 
out,  220,  221. 

Illustrations  James  Fisk,  Jr.,  212 ;  Jay  Gould,  216. 


CHxAPTER  XVI 


Black  Friday . . 222 

Gold  Bears  tempted  to  increase  their  short  sales,  222;  Fisk  advises  terrorism,  223; 
William  Belden  &  Co.,  as  main  agents,  223;  Albert  Speyers,  223;  early  bidding  on 
September  24,  1869,  “Black  Friday,”  224;  Fisk  as  the  “Napoleon  of  Finance,”  224; 
Speyers  holds  Gold  price  at  150,  and  addresses  the  Stock  Board,  225;  graphic  scenes 
in  the  Gold  Room,  227;  James  Brown  dares  to  sell,  228;  theU.  S.  Government  sells 
Gold,  and  breaks  the  Corner,  28 ;  Speyers  continues  to  bid  160,  on  Fisk’s  order,  228 ; 

Tenth  National  Bank  under  fire,  229 ;  Panic  in  Stock  Prices,  229,  230 ;  Brokers  attack 
Smith,  Gould,  Martin  &  Co’s,  offices,  231;  flight  of  the  partners,  231;  Gold  Exchange 
Bank  in  a  Receiver’s  hands,  232 ;  aftermath  of  the  Panic,  233 ;  Poem  on  Black  Friday, 

234. 

Illustration:  —  The  “  Gold  Room,”  New  York  Gold  Exchange,  Broad  Street,  1869,  226. 


CONTENTS  OF  VOLUME  ONE 


XXI 


CHAPTER  XVII 

The  Ending  of  Two  Notable  Careers 


PAGE 

235 


Fisk  as  “Prince  Erie”,  235;  the  Albany  and  Susquehanna  War,  236;  building  of  the 
great  Pacific  Roads,  237 ;  the  Credit  Mobilier  of  America,  237 ;  Fisk’s  suits  against 
Union  Pacific  and  Vanderbilt,  238;  Rock  Island  Corner  of  1871,  239;  William  S.  Wood¬ 
ward,  239;  the  Bull  Pool,  241;  Woodward  deeply  committed,  241;  applies  to  Vander¬ 
bilt  and  Drew,  242;  Drew  tricks  Woodward,  243;  Corner  ends  in  ruin,  244;  Orange¬ 
men’s  Riot  (1871),  244;  Col.  Fisk  routed,  245;  Jay  Cooke’s  house  refunds  the  War 
Loan,  245;  the  Great  Chicago  Fire,  246,  247;  Brokers  aid  its  victims,  246;  violent 
market  break  and  recovery,  247 ;  an  Erie  storm  signal,  248 ;  Fisk  assassinated  by  E. 
Stokes,  248,  249. 

Illustrations: — Thomas  Clark  Durant,  238  ;  William  Searle  Woodward,  242. 


CHAPTER  XVIII 


The  Passing  of  the  Erie  Ring . 250 

Shrewd  classification  of  the  Erie  Directors,  250;  treachery  in  the  Gould  camp,  251; 

Gould  attacked  by  a  reform  combination,  251;  a  new  Board  elected,  252;  Gould 
holds  the  fort,  and  violent  scenes  ensue,  252,  253;  Gould  finally  yields,  253;  strong 
advance  in  Erie  shares,  254;  downfall  of  Judges  Barnard  and  Cardozo,  254;  the 
great  Boston  Fire  of  1872,  255 ;  the  Chicago  and  North-Western  Comer,  255,  258 ;  Gould 
gains  a  Vanderbilt  alliance,  256;  Drew,  H.  N.  Smith  and  others,  badly  caught,  256; 
they  procure  the  arrest  of  Gould,  257 ;  he  obtains  his  release  and  makes  the  Corner 
absolute,  257;  Drew’s  fortune  impaired  by  consequent  losses,  258;  the  Street  badly 
hit  in  the  settlement,  258 ;  the  Watson  Suit  against  Mr.  Gould,  259 ;  Gould’s  restitu¬ 
tion  of  Erie  assets,  260. 


CHAPTER  XIX 


The  Panic  of  1873  .  261 

Origin  of  Panics  in  the  United  States,  261 ;  false  prosperity  engendered  by  Legal  Tenders, 

262 ;  extravagant  Railway  Building,  262 ;  Government  aid  to  the  Railway  promoters, 

263;  to  the  Pacific  Roads,  263;  early  conditions  in  1873,  264;  the  Vienna  Panic,  264; 

New  York  Security  and  Warehouse  failure,  followed  by  others,  265;  Jay  Cooke  and 
the  Northern  Pacific,  265;  small  investors  buy  the  Cooke  Bonds,  266;  suspension  of 
Jay  Cooke  &  Co.,  and  its  results,  266-268;  fright  in  Wall  Street,  268;  Fisk  and  Hatch 
suspend,  268  failures  of  Firms,  Banks,  and  Trust  Companies,  269;  the  Union  Trust 
Company  troubles,  269;  New  York  Stock  Exchange  Closed  on  Saturday,  September  SO 
(1873),  269;  President  Grant  refuses  to  issue  fresh  Legal  Tenders,  270;  Banks  pool 
Reserves,  and  nuspend  Currency  Payments,  270;  an  Outdoor  Exchange  temporarily 
in  operation,  270;  more  leading  houses  fail,  271;  Export  Trade  paralyzed, 

271 ;  on  September  30th,  the  Stock  Exchange  Re-opens,  271 ;  Table  of  Fluctuations  from 
August  to  December,  272;  Panic  in  the  commercial  world,  272-274;  the  Sprague 
Failures,  273;  Wages  cut,  and  Strikes  ensue,  273;  bankruptcy  of  the  Northern  Pacific, 

274. 


Illustration  : — Jay  Cooke,  266. 


XXII 


THE  NEW  YORK  STOCK  EXCHANGE 


CHAPTER  XX  PAGE 

Recuperation  and  Resumption  . . 275 

Remedies  proposed  by  financiers,  275 ;  Mr.  Gould’s  operations  in  Union  Pacific,  etc., 

276;  failure  of  the  Erie  and  Wabash  Roads,  and  of  Duncan,  Sherman  &  Co.,  276:  Bank 
of  California  fails,  277 ;  amount  of  outstanding  Legal  Tenders,  277 ;  fresh  Inflation 
proposed,  278;  Grant’s  Veto  checks  the  plan,  279;  the  Specie  Resumption  Act,  279; 
the  Greenbackers  and  Peter  Cooper,  279  ;  the  Tilden-Hayes  Presidential  Campaign,  279 ; 

Bland  Silver  Bill  passed  over  the  Veto  of  President  Hayes,  280 ;  Gold  Premium  lessened 
by  the  Specie  Resumption  Act,  280 ;  Government  Notes  at  Par  in  December  (1878),  281 ; 

Specie  Payments  resumed  January  2  (1879),  281 ;  Granger  Legislation  against  Railroads, 

281;  Gould’s  successful  deals,  282;  bankruptcy  of  Daniel  Drew,  282;  death  of  Com¬ 
modore  Vanderbilt,  282 ;  William  H.  Vanderbilt  begins  his  market  career,  283 ;  his 
handling  (1876)  of  the  Great  Railway  Strike,  283 ;  Vanderbilt,  Keene,  Sage,  and  Gould 
as  market  factors,  284;  Selover’s  attack  on  Gould,  285;  failure  and  flight  of  John 
Bonner,  285 ;  better  financial  conditions,  286 ;  new  Coal  and  Railway  Combinations,  286. 

CHAPTER  XXI 


Railway  Wars  and  Truces  .  . 287 

Buoyant  Spring  Market,  287 ;  Mr.  Gould  triumphs  over  obstacles,  287 ;  revival  of 
Telegraph  hostilities,  288;  Gould  ends  them,  and  is  in  control  of  Western  Union  Con¬ 
solidation,  288 ;  he  breaks  the  stocks,  and  acquires  control  of  the  New  York  Elevated 
Railway  System,  289;  the  Stock  Exchange  buys  adjacent  property,  290;  temporary 
Market  crash  in  November  (1879),  290;  W.  H.  Vanderbilt  sells  250,000  New  York 
Central  to  an  International  Syndicate,  290;  Gould  in  the  new  role  of  an  upbuilder,  291; 
acquires  and  merges  the  Union,  the  Kansas,  and  the  Denver  Pacifies,  291-294 ;  how  this 
was  done,  292;  puts  the  minor  Railways  in  at  par,  293;  absorbs  Wabash,  the  Missouri 
Pacific,  the  M.,  K.  &  T.,  the  Texas  Pacific,  etc.,  and,  allied  with  C.  P.  Huntington,  starts 
in  to  build  up  the  great  Southwestern  Railway  System,  294;  the  Reading  smash  of 
1880,  and  general  Coal  Stock  troubles,  295;  election  of  President  Garfield,  295;  his 
assassination,  296;  its  market  effect,  296;  practically  the  end  of  the  long  Bull 
speculation,  296 ;  the  Hannibal  &  St.  Joseph  Corner,  296-298 ;  Hutchinson’s  treachery 
to  Duff,  297 ;  failure  of  the  Union  Generate,  and  the  Year  1882  marked  by  adversity, 

298  ;  the  “Nickel  Plate”  Road  bought  by  Vanderbilt’s  “Lake  Shore,”  299. 

CHAPTER  XXII 

An  Era  op  Impaired  Confidence  . . 301 

Speculative  movements  traceable  to  certain  men,  301 ;  rise  of  Henry  Villard,  302 ; 
the  Oregon  Railway  situation,  303 ;  the  New  Northern  Pacific  Company,  303 ;  a  Villard 
Pool  buys  control  of  it,  304;  his  imposing  Railway  scheme,  304;  the  Oregon  and 
Transcontinental  “Blind  Pool,”  305;  rapid  building  of  Northern  Pacific  Road  and  top 
level  reached  in  its  market  Securities,  305 ;  the  Year  1883  and  its  characteristics,  305; 
the  Telegraph  Operators’  Strike,  306 ;  Charles  F.  Woerishoffer,  306;  his  Denver  and  Rio 
Grande  Promotion,  307  ;  he  attacks  Villard  and  the  Northern  Pacific  Party,  308 ;  defeat 
of  Mr.  Villard,  309;  Ferdinand  Ward,  309;  the  firm  of  Grant  &  Ward,  310;  James  D. 

Fish  and  General  Grant  ensnared,  311 ;  Ward’s  audacious  swindles,  312 ;  collapse  of 
West  Shore  Securities,  313;  Mr.  White’s  Lackawanna  “Squeeze,”  314;  Mr.  Keene’s  failure 
and  speedy  resumption,  314;  the  Marine  Bank  failure,  314;  Grant  &  WTard  go  down 
with  a  crash,  315 ;  panic  ensues,  315;  ruin  of  the  Grant  family,  316;  the  Eno  defalca¬ 
tion,  316 ;  the  Seney  failure  and  Panic,  317 ;  suspension  of  the  Metropolitan  Bank,  and 
of  brokerage  houses,  318 ;  Sixth  Issue  of  Clearing  House  Certificates,  318 ;  A.  W.  Dimock 
&  Co.,  319;  Fisk  &  Hatch,  319;  Mr.  Sage’s  losses  on  Stock  Privileges,  319;  the  Com¬ 
mercial  Cable  Co.’s  Cable  landed,  320;  Mr.  Gould  retires  from  the  Union  Pacific  Road, 
and  Charles  Francis  Adams  becomes  its  President,  succeeding  Sidney  Dillon,  320;  Matthew 
Morgan’s  Sons,  320. 

Illustrations  :  —  Henry  Villard,  302  ;  Charles  F.  Woerishoffer,  307. 


CONTENTS  OF  VOLUME  ONE 


XXIII 


CHAPTER  XXIII 

Fresh  Battles  Among  the  Railways 


PAGE 

321 


Failure  of  the  Wall  Street  Bank,  321;  first  election  of  President  Cleveland,  322;  early 
troubles  in  1885,322;  J.  J.  Cisco  &  Co.  and  Mrs.  Green, 323 ;  first  dealing  in  “  Unlisted” 
Stocks,  323;  temporary  disruption  of  the  Transcontinental  Pool,  323;  Huntington’s 
‘‘Sunset  Route,”  323;  Chauncey  M.  Depew,  324;  J.  P.  Morgan’s  West  Shore  settlement 
turns  the  market,  324;  bear  failures  —  W.  Heath  &  Co.  and  H.  N.  Smith,  325;  death  of 
W.  H.  Vanderbilt,  326;  “Trusts”  as  a  popular  term  in  1886,  326;  Transcontinental 
Pool  ended,  327 ;  Coal  Stocks  strengthened  by  Morgan’s  “Gentlemen’s Agreement,”  327; 
death  of  Woerishoffer,  328;  excited  advance  and  reaction  in  market,  328;  the  Rich¬ 
mond  and  West  Point  Terminal  episode,  328;  disruption  of  the  Wabash  System,  329; 
the  Alfred  Sully  party,  329 ;  capture  of  the  Baltimore  &  Ohio  frustrated,  330 ;  entrance 
of  Henry  S.  Ives,  330;  his  schemes  and  methods,  331;  gains  control  of  Cincinnati, 
Hamilton  &  Dayton  and  the  Vandalia  Systems,  332;  covets  Baltimore  &  Ohio,  332 ;  Ives’s 
bankruptcy  follows  the  collapse  of  his  deal  with  Mr.  Garrett,  333 ;  a  Morgan  Syndicate 
readjusts  the  Baltimore  and  Ohio  finances,  334;  Cyrus  W.  Field’s  disastrous  campaign 
in  Manhattan  stock,  334;  Chesapeake  &  Ohio  receivership,  334;  A.  S.  Hatch,  334; 
strong  market  in  1888  and  advance  in  “  Seats,”  335 ;  the  March  Blizzard,  335 ;  St.  Paul 
road  in  trouble,  335;  advance  effect  of  the  Sherman  Anti-Trust  Bill,  336;  the  Hutchin¬ 
son  Wheat  Corner,  336;  unpleasant  finale  of  A.  D.,  1888,  336. 


CHAPTER  XXIV 


Monetary  Disturbances . 337 

The  Interstate  Commerce  Railway  Association  (“ Gentlemen’s  Agreement”),  337;  the 
rival  Tickers,  338;  the  “Baring  Panic,”  339-344;  Baring  Brothers  in  Argentine  Securi¬ 
ties,  339;  disturbance  in  the  United  States,  340;  the  McKinley  Tariff,  340;  failure  of 
Sixth  National  Bank,  340 ;  Democratic  gains  in  1890,  341 ;  crash  in  “  the  Villards,”  342 ; 
Clearing  House  Banks  issue  Relief  Certificates,  343;  failure  of  Baring  Brothers,  343; 

Gould  and  Sage  buy  control  of  the  Pacific  Mail,  344;  an  era  of  “Trust”  speculation, 

345;  Rockefeller  and  Standard  Oil,  345;  views  of  Andrew  Carnegie,  345;  multiplication 
of  new  Industrial  combinations,  346;  the  Western  Traffic  Association,  346;  death  of 
Cyrus  W.  Field,  347 ;  attack  on  Russell  Sage,  347 ;  the  McLeod  Anthracite  combination, 
347-348 ;  Gold  outflow  caused  by  distrust  of  Sherman  Silver  Law,  348 ;  Grover  Cleve¬ 
land  re-elected  President,  349;  death  of  Jay  Gould,  349. 

Illustration  Ward’s  Statue  of  Washington  erected  in  1883,  338. 


CHAPTER  XXV 

The  Threat  of  Unsound  Currency . 350 

Evils  of  the  Sherman  Silver  Purchase  Act,  350;  causes  of  the  Panic  of  1893,  351;  effect 
of  Sherman  Act,  351 ;  foreign  distrust  of  our  finances,  352 ;  McLeod’s  operations  in 
New  York  and  New  England  stock,  353;  bankruptcy  of  Reading,  353;  advance  balance 
of  trade,  354 ;  the  Gold  Reserve  threatened,  354 ;  Secretary  Carlisle’s  action,  355 ;  Great 
Western  on  ’Change,  355 ;  the  National  Cordage  disaster,  356 ;  Stock  Market  failures, 

357;  the  “White  Panic,”  357  ;  the  rally,  358;  troubles  in  the  West,  359;  ex-Secretary 
Foster’s  failure,  359;  currency  drain  to  the  West,  360;  Clearing  House  Certificates 
again  issued,  360;  partial  suspension  of  Currency  Payments,  360;  Indian  Mints  stop 


XXIV 


THE  NEW  YORK  STOCK  EXCHANGE 


PAGE 

The  Threat  of  Unsound  Currency  ( Continued)  . 350 

Silver  Coinage,  361;  President  Cleveland  convenes  Congress,  362;  distress  of  merchants 
and  workingmen,  362 ;  Erie  Railway  bankrupt,  363 ;  course  of  prices  in  1893,  363 ;  Gold 
Imports  revive  courage,  364;  failure  of  the  Northern  Pacific  Railway,  364;  repeal  of 
Sherman  Act,  364;  general  stock  rally,  365;  better  mercantile  conditions,  365 ;  Cleve¬ 
land  issues  Bonds  to  protect  Gold  Reserve,  366 ;  Tariff  Legislation,  367 ;  the  Senatorial 
Sugar  campaign,  367;  “American  Railway  Union”  Boycott,  368;  railway  dividends 
reduced,  368 ;  the  Morgan-Belmont  Government  Loan,  369 ;  the  Venezuelan  Imbroglio, 

370;  Issue  of  $100,000,000  4-30  United  States  Bonds,  371;  the  Free  Silver  campaign 
of  1896,  372;  the  “Bryan  Panic,”  372;  defeat  of  the  Inflationists,  373. 

Illustration:  — The  Stock  Exchange  in  Broad  Street,  1893,  361. 


CHAPTER  XXYI 

The  Influence  of  a  Foreign  War . 374 

Causes  of  the  latter-day  prosperity,  374;  liberal  War  expenditures  and  bounteous 
Crops,  375;  Klondike  Gold,  375;  the  People  converted  to  sound  currency,  375;  plethora 
of  good  money,  375;  enactment  of  the  Dingley  Tariff,  376;  the  Leiter  Wheat  Deal,  377- 
380;  War  omens  check  the  Stock  Market,  378;  New  York  Central  absorbs  Lake  Shore, 
destruction  of  the  Battleship  Maine,  378;  the  War  begins,  379;  speedy  rise  in  Stocks 
and  Grain,  379;  Peace  declared  and  inception  of  a  great  rise  in  Securities,  381;  enor¬ 
mous  speculation  in  January,  1899,  381 ;  Brooklyn  Rapid  Transit,  Sugar,  etc.,  382 ;  the 
Whitney-Widener-Elkins  Syndicate,  383;  flotation  of  Amalgamated  Copper,  383; 

Stocks  break  with  death  of  Governor  Flower,  384;  the  Transvaal  War,  384;  1899  closes 
adversely,  385 ;  the  campaign  against  the  Third  Avenue  Railroad  property,  386-388. 


CHAPTER  XXVII 


Culmination  of  an  Era . 389 

Antecedents  of  the  Steel  Trust,  389;  John  W.  Gates  cuts  prices  of  Iron  Products,  390; 
heavy  Stock  and  Cotton  Failures,  390 ;  McKinley  re-elected,  391 ;  merger  of  the  great 
Coal  interests,  391;  bright  hopes  begin  the  Twentieth  Century,  391;  early  excitement 
in  the  Market,  392;  E.  H.  Harriman  and  Union  Pacific  acquire  Southern  Pacific,  392; 

Mr.  Carnegie  and  the  Steel  Industrials,  392;  the  great  Steel  Merger,  393 ;  the  Market  in 
United  States  Steel  Stocks  confided  to  Mr.  Keene,  394;  the  co-operative  principle  rec¬ 
ognized,  394;  great  rival  Railway  Combinations,  395;  contest  for  possession  of  North¬ 
ern  Pacific,  396;  unexampled  speculation,  397;  the  Stock  Exchange  removes  to  the 
Produce  Exchange  Building,  April  26,  1901,  397 ;  Wall  Street’s  Record  Day,  April  30, 

398;  the  memorable  “Northern  Pacific  Panic”  of  May  9th,  399-400;  President 
McKinley  assassinated,  401;  break  in  Amalgamated  and  other  “Coppers,”  402;  the 
Northern  Securities  Company,  403 ;  the  Louisville  &  Nashville  Corner  and  Transfer,  404 ; 
President  Roosevelt  settles  the  Coal  Strike,  405 ;  summer  rise  and  continued  decline  in 
1902,  405;  conclusion  of  the  story,  406;  renewed  and  existing  National  Prosperity, 407. 

Illustrations:— Produce  Exchange,  398;  Entrance  to  Safe  Deposit  Vault  of  the  New 
Exchange,  406;  Interior  of  Vault,  407. 


Ill 


The  New  Stock  Exchange  .  .  .  John  Itodemeyer  411 

Illustration:  — Inserted  Plate— Pediment,  with  Statuary  by  J.  Q.  A.  Ward,  facing 
Page  415. 


CONTENTS  OF  VOLUME  ONE 


XXV 


IV 


The  Stock  Exchange  Clearing  House  .  John  Grosvenor  Wilson 


The  Stock  Ticker 


y 

.  .  Horace  L.  Hotchkiss 


VI 

* 

The  Loan  Market  .....  Emerson  Chamberlin 

VII 

The  Unlisted  Security  Market  .  .  .  Henry  I.  Judson 


Municipal  Bonds 


Annals  and  Statistics 


Constitution  and  Rules  for 
the  Government  of  the 
New  York  Stock  Exchange 


Legal  Status  of  the 
New  York  Stock  Exchange 


viii 

.  .  .  William  F.  G.  Shanks 

IX 

.  .  .  .  Milton  J.  Platt 

X 

As  Amended  and 
Adopted  in  March,  1902 

XI 

.  .  .  John  E .  Dos  Passos 


PAGE 

423 


433 


445 


457 


461 


467 


485 


511 


A  General  Index  to  the  Entire  Work  will  be  found  in  the  Closing  Volume. 


THE  NEW  YORK  STOCK 


EXCHANGE 


THE  FUNCTIONS  OF  THE  STOCK 


EXCHANGE 


By 


MATTHEW  MARSHALL 


(THOMAS  HITCHCOCK) 


THE  FUNCTIONS  OF  THE  STOCK 

EXCHANGE 


BY 


MATTHEW  MARSHALL 

(THOMAS  HITCHCOCK) 

TOOK  exchanges,  like  exchanges  for  dealing  in  cotton,  coffee, 
metals,  grain  and  similar  commodities,  are  institutions  of 
comparatively  recent  origin.  They  are  results  of  modern 
commercial  and  industrial  development,  and  mark  the  high 
degree  of  complexity  to  which  that  development  has  been 
brought.  |  As  the  machinery  of  a  cotton  or  woollen  factory 
is  the  elaboration  and  amplification  of  the  primitive  spinning-wheel  and 
loom,  as  the  network  of  railroads  in  civilized  lands  has  succeeded  to  the 
rude  foot-paths  and  cart-tracks  of  early  times,  and  as  the  huge  ocean 
steamer,  with  its  manifold  appliances  of  luxury,  has  grown  out  of  the  oar- 
propelled  canoe,  so  the  great  marts,  in  which  stocks  and  bonds  of  endless 
variety  are  now  bought  and  sold,  originated  in  the  rudimentary  trading  of 
our  ancestors  many  centuries  ago. 

As  soon  as  mankind  became  sufficiently  advanced  in  civilization  to 
apportion  among  themselves  the  various  handicrafts  and  occupations 
by  which  their  wants  were  supplied,  each  man  or  family  appropriating 
one  in  particular  instead  of  practising  all  in  turn,  the  necessity  arose 
for  a  method  of  so  distributing  the  products  of  these  several  industries 
that  every  member  of  the  community  should  get  what  he  needed.  At 
first,  the  distribution  was  effected  by  producers  bartering  their  surplus 
product  for  other  products,  in  quantities  determined  by  the  relative  value 
of  each.  Services  and  labor  were  likewise  compensated  by  other  service 
and  labor,  and  thus,  in  a  roughly  approximate  way,  the  desired  result 
was  accomplished. 

The  inconveniences  of  this  practice  of  barter  early  led  to  the  invention 
of  money,  by  the  aid  of  which  the  producer  sold  his  product  outright,  and 


6 


THE  NEW  YORK  STOCK  EXCHANGE 


with  the  proceeds  bought  the  other  products  he  desired.  Money  wages 
took  the  place  of  payment  for  labor  and  services  in  commodities,  and 
values  were  measured  by  one  common  denominator,  instead  of  being  com¬ 
puted  in  as  many  ways  as  there  were  products  of  industry.  In  fact,  long 
previous  to  the  adoption  of  coined  money,  some  one  article  of  extensive 
use  was  taken  as  a  standard,  and  values  were  reckoned  with  reference  to 
it.  Thus  cattle  were  the  standard  in  Greece,  and  prices  were  stated  in  it 
as  they  are  still  in  South  Africa  by  the  Boers:  things  being  said  to  be 
worth  so  many  oxen,  instead  of  so  many  dollars  or  other  coins.  Among 
the  ancient  Germans  fines  were  imposed  and  paid  in  cattle,  and  rents  of 
land  are  still,  in  some  instances  in  England,  payable  in  bushels  of  wheat. 
In  the  infancy  of  the  American  colonies,  skins,  polished  shells,  called  wam¬ 
pum,  and  hogsheads  of  tobacco,  were  measures  of  value,  and  it  is  not 
many  years  since  logs  and  shingles  in  some  Western  States  of  this  Union 
were  used  for  the  same  purpose.  Indeed,  the  list  of  articles  which  at 
some  time  and  in  some  places  have  served  as  instruments  of  exchange,  and 
which  still  serve  as  such,  is  as  varied  and  extensive  as  are  the  products  of 
the  animal,  vegetable,  and  mineral  kingdoms. 

(With  the  introduction  of  money  the  distribution  of  the  fruits  of  human 
industry,  which  had  before  been  difficult,  became  easy  and  active.  A  class 
of  men  arose  who  devoted  themselves  to  effecting  this  distribution  by 
buying  from  one  producer  or  class  of  producers  and  selling  to  others. 
Shops  and  warehouses  were  established  for  the  storing  of  commodities  and 
the  keeping  of  them  until  buyers  for  them  presented  themselves.)  The 
transportation  of  these  commodities  from  one  point  to  another  created 
the  business  of  carriers  by  land  and  by  sea,  and  thus,  gradually,  commerce 
grew  up.  Thus,  too,  for  the  facilitation  of  buying  and  selling,  buyers  and 
sellers  adopted  the  practice  of  meeting  each  other  at  stated  times  and 
places,  instead  of  seeking  one  another  at  scattered  points ;  and  out  of  this 
practice  originated  the  primitive  market  or  fair,  which  survives  to  this 
day,  especially  in  Europe.  Markets  are  held  there  daily  for  the  sale  of 
food,  and,  at  less  frequent  intervals,  for  that  of  horses,  cattle,  wool,  furs, 
and  other  articles.  At  the  summer  fairs  of  Nijni  Novgorod,  in  Russia, 
200,000  traders  assemble,  who  sell  and  buy  tea,  grain,  cotton,  wool,  hides, 
furs,  metals,  and  gems  to  the  amount  of  $100,000,000  annually.  At 
Leipzig,  Germany,  fairs  are  held  for  the  sale  of  books  and  of  furs;  at 
Amsterdam  and  other  Dutch  cities  the  fairs,  or  kirmesses,  are  attended  by 
crowds  who  seek  amusement  as  well  as  pecuniary  gain.  To  the  English, 
Scotch,  and  Irish  fairs,  English  literature  makes  so  frequent  reference  that 
it  is  hardly  necessary  to  mention  them. 

The  creation  of  stock  exchanges  took  its  rise  in  the  dealings  in  money 
and  bills  of  exchange,  which  followed  the  enlargement  of  international 


THE  FUNCTIONS  OF  THE  STOCK  EXCHANGE 


7 


commerce  by  the  Venetians  and  the  Genoese.’  The  Rialto  at  Venice  has 
been  made  famous  by  Shakespeare  as  the  place  where  merchants  congre¬ 
gated  to  borrow  and  to  lend  money,  and  to  sell  and  to  buy  transfers  of 
it  by  drafts  on  other  mercantile  cities./  Lombard  Street,  in  London,  was 
another  great  money-market.  There,  as  on  the  Rialto,  business  was  for  a 
long  time  done  in  the  open  air,  and  not  until  the  end  of  the  sixteenth  cen¬ 
tury  wras  the  Royal  Exchange  in  London  built  for  the  use  of  merchants, 
the  cost  of  the  building  being  defrayed  by  the  celebrated  Sir  Thomas 
Gresham,  and  that  of  the  land  by  private  subscriptions.  In  the  course  of 
time,  this  exchange  was  supplemented  by  numerous  other  exchanges,  each 
devoted  to  dealings  in  some  special  commodity,  like  the  various  exchanges 
we  have  now  in  this  country. 

U  Obviously,  until  the  quantity  and  variety  of  stocks  and  bonds  that 
could  be  dealt  in  were  large  enough  to  justify  it,  there  was  no  need  of  a 
special  market-place  for  them. I  With  the  beginning  of  the  Eighteenth 
Century,  however,  the  success  of  the  South  Sea  Scheme  in  London,  and  of 
Law’s  Mississippi  Company  in  Paris,  bred  a  swarm  of  similar  enterprises, 
gambling  in  the  shares  of  which,  as  in  those  of  the  South  Sea  and  the 
Mississippi  companies,  for  a  time  went  on  at  a  furious  rate,  and  gained 
and  lost  fortunes  for  those  who  participated  in  it.  Not  yet,  though,  was 
this  trading  done  under  a  roof.  The  theatre  of  it  in  London  was  Change 
Alley,  Corahill,  and  in  Paris  the  Rue  Quincampoix.  A)nly  in  1802  was 
the  London  Stock  Exchange  built,  and  the  Paris  Bourse  and  our  American 
stock  exchanges  ara  of  still  more  recent  date.  How  enormously  the  busi¬ 
ness  of  these  institutions  has  increased, we~all  know.  The  multiplication 
of  industrial  and  financial  corporations,  and  the  immense  issues  of  national 
and  municipal  debts,  have  swelled  the  value  of  marketable  securities  until 
the  stock  lists  of  the  exchanges  of  London  and  of  New  York  embrace  the 
titles  of  thousands  of  different  stocks  and  bonds,  the  aggregate  value  of 
which  is  many  thousands  of  millions  of  dollars,  j 

The  reason  of  the  existence  of  the  Stock  Exchange  is,  therefore,  the 
same  as  that  of  the  primitive  market,  and  as  that  of  the  Produce  Exchange, 
the  Cotton  Exchange,  the  Coffee  Exchange,  and  every  other  similar  insti¬ 
tution.  A  stock  exchanges'  furnishes  to  buyers  and  sellers  of  stocks  and 
bonds  opportunities  for  the  transaction  of  their  business  not  otherwise 
obtainable.  Like  markets  and  fairs,  it  spares  men  the  necessity  of  seeking 
one  another  at  scattered  points,  and  thus  brings  within  the  compass 
of  a  few  hours  dealings  which,  without  its  help,  vrould  be  spread  over  an 
indefinite  period.  It  is,  moreover,  an  intensification  of  the  gregariousness 
of  trades,  which  makes  Wall  Street  and  Lombard  Street  financial  centres, 
and  has  led  dry-goods  dealers,  viiolesale  grocers,  book  publishers,  and 
leather  merchants  to  create  quarters  specially  occupied  by  their  businesses. 


8 


THE  NEW  YORK  STOCK  EXCHANGE 


The  New  YTork  Stock  Exchange  bears  the  same  relation  to  Wall  Street 
that  Wall  Street  does  to  the  world. 

The  concentration  of  business  at  the  Stock  Exchange  has  recently  been 
wonderfully  promoted  by  the  invention  of  the  electric  telegraph  and  of  the 
telephone.  The  wires  running  from  the  New  York  Stock  Exchange,  for 
example,  are  connected  with  offices  not  only  in  the  metropolis,  but  through¬ 
out  the  whole  country.  The  groups  that  gather  about  each  “ticker,”  and 
watch  the  record  made  by  its  tape,  become  practically  part  of  the  crowd 
that  occupies  the  floor  of  the  Exchange,  and  the  news  of  the  fluctuations 
of  prices  which  take  place  there  flashes  instantly  to  thousands  of  remote 
points.  Fifty  years  ago  the  business  of  the  Exchange  was  done  decorously 
by  a  few  dozen  brokers,  sitting,  like  senators,  quietly  in  their  arm-chairs, 
while  the  President  called  each  stock  in  its  turn,  the  sales  of  each  day 
being  noted  in  pen  and  ink  by  the  brokers  in  their  books.  Now  the  thou¬ 
sand  and  more  brokers  are  split  up  into  groups,  each  dealing  in  a  special 
stock,  and  all  stimulated  to  exertion  by  the  responses  of  the  distant  multi¬ 
tude  connected  with  them  by  the  electric  wires.  The  Exchange  is,  for  the 
time,  the  common  meeting-place  of  all  the  sellers  and  buyers  in  the  coun¬ 
try,  and  the  “tickers,”  which  have  taken  the  place  of  the  old  brokers’ 
records,  reflect  the  varying  phases  of  their  transactions.  Being  thus 
the  central  market  for  securities,  it  also  demonstrates  their  value  in 
public  estimation.  Out  of  the  conflicting  operations  of  sellers  and 
buyers  an  average  results,  which,  as  nearly  as  the  imperfection  of  the 
human  mind  will  permit,  represents  the  worth  as  commodities  of  the 
articles  dealt  in. 

\  Because,  too,  of  the  facilities  for  buying  and  selling  afforded  by  the 
Stock  Exchange,  borrowers  seeking  large  amounts  of  money  find  it  much 
easier  to  obtain  them  than  they  otherwise  would.  I  How  immensely  the 
industrial  development  of  this  and  other  countries  has  been  stimulated 
by  laws  authorizing  the  creation  of  corporations  is  well  known.  '<  Enter¬ 
prises  for  which  a  very  few  men,  singly,  possess  the  needful  capital,  and 
which,  therefore,  would  have  to  wait  for  the  help  of  a  few  large  capitalists, 
are  made  immediately  feasible  by  the  incorporation  in  stock  companies  of 
a  multitude  of  owners  of  small  amounts.  The  Stock  Exchange  aids  the 
process  of  combination  by  bringing  the  securities  of  the  resulting  corpora¬ 
tions  to  the  attention  of  the  public,  and  thus  creating  a  market  for  them. 
Where  one  purchaser  buys  them  on  personal  application,  a  hundred  do  so 
because  they  are  dealt  in  on  the  Exchange.  It  is  the  same  with  govern¬ 
mental  and  municipal  loans.  These  are,  indeed,  in  the  first  instance,  taken 
by  others  than  buyers  on  the  Exchange;  but  the  fact  that  they  are  market¬ 
able  there  is  an  essential  element  of  their  selling  value.  A  man  hesitates 
to  invest  his  money  in  a  security  not  readily  salable,  and  will  pay  less  for 


THE  FUNCTIONS  OF  THE  STOCK  EXCHANGE  9 

it  than  he  will  for  one  which  he  knows  he  can  reconvert  into  money 
whenever  he  desires  to.  ^ 

1 1  Herein  consists,  too,  another  important  service  which  the  Stock 
Exchange  renders  to  the  community.  It  enables  men  who  have  previously 
invested  their  capital  in  bonds  and  stocks,  and  who  desire  to  withdraw  it, 
to  do  so  speedily  and  with  a  minimum  of  loss.f  Had  the  seller  in  such  a 
case  to  seek  a  buyer  by  going  from  office  to  office  in  New  York  or  elsewhere, 
or  by  advertising  in  the  newspapers,  it  might  be  weeks  and  perhaps 
months  before  he  succeeded  in  finding  one,  and  even  then  he  might  have 
to  accept  a  ruinously  low  prige  for  his  property.  Now  he  can  get  a 
buyer  for  it  almost  at  once,  and  at  a  small  concession  from  the  real  value 
of  it.  Some  one  will  take  it, —  if  not  to  keep,  then  on  the  chance  of  selling 
at  a  profit  to  a  future  buyer. 

j  In  times  of  sudden  and  extraordinary  demands  for  money  or  of  alarm 
over  the  prospect  of  loss  by  the  depreciation  of  any  security,  the  market 
afforded  by  the  Stock  Exchange  mitigates  the  severity  of  the  crisis  and 
sometimes  ends  it  altogether,  Among  the  multitude  of  dealers,  some  will 
always  take  a  more  hopeful  view  of  the  future  than  others,  and  will  buy 
securities  at  a  comparatively  small  decline.  They  come  in  and  support 
the  market,  as  it  is  said,  and,  though  they  may  prove  to  have  been  wrong 
in  their  judgment,  they  break  the  force  of  the  fall  and  spread  it  over  a 
longer  period.  Conversely,  when  there  is  an  extraordinary  demand  from 
buyers,  and  prices  are  forced  up  above  their  just  level,  speculative  sellers 
check  the  rise  and  prevent  it  going  as  fast  and  as  far  as  it  would  go  without 
their  interference,  feonds  and  stocks  being  thus  made,  by  the  agency 
of  the  Stock  Exchange,  readily  convertible  into  money,  the  fluctuations 
in  their  prices  as  a  whole  are  usually  a  fair  indication  of  the  condition  of 
the  money-market.  For  whereas  special  commodities,  such  as  wheat  and 
cotton,  are  dealt  in  only  by  a  portion  of  the  community  and  vary  in  price 
according  to  the  prospect  of  good  and  bad  crops,  stocks  and  bonds  are 
bought  and  sold  by  people  of  all  occupations,  and  the  demand  for  them  is 
governed  by  the  amount  of  money  available  for  buying  them.  ■  When 
money  is  plenty,  as  it  is  said,  the  owners  of  it  are  more  willing  to  buy 
stocks  than  when  it  is  scarce.  When  the  fear,  too,  of  an  impending  war, 
or  a  like  deterrent  force,  prevails,  the  owners  of  money  refuse  to  buy  and 
prefer  to  sell.  Thus  the  transactions  at  the  Stock  Exchange  indicate  the 
preponderance  of  public  opinion  one  way  or  the  other.  When,  too,  a 
commercial  crisis  prevails,  merchants  who  have  invested  their  spare  capital 
in  stocks  hasten  to  obtain  money  by  selling  them,  and  the  prices  they  are 
willing  to  accept  for  them  measure  the  degree  of  their  necessities  or  the 
intensity  of  the  alarm  they  feel. 

In  popular  estimation,  “bears,”  or  dealers  on  the  Stock  Exchange  who 


10 


THE  NEW  YORK  STOCK  EXCHANGE 


take  an  unfavorable  view  of  a  security,  and  back  their  opinion  by  selling 
it  for  future  delivery  at  prices  from  which  they  think  they  foresee  a  decline, 
are  pure  mischief-makers,  whereas,  “bulls,”  or  buyers  for  an  expected 
further  rise,  are  regarded  as  benefactors.  This  arises  from  the  fact  that 
the  great  majority  of  men  are  accustomed  to  make  profits  only  by  selling 
what  they  buy  and  for  more  than  they  pay  for  it,  and  to  suffer  losses  when 
they  sell  for  less.  Then,  too,  rising  prices  increase  the  apparent  wealth  of 
every  owner  of  securities,  as  falling  prices  diminish  it,  and  the  “bear” 
who  prevents  a  rise  or  brings  about  a  fall,  seems  to  be  a  destroyer  of 
values.  The  truth  is  that  the  “bear,”  as  has  been  pointed  out,  checks 
undue  inflations  of  prices,  and,  again,  when  he  buys  to  fulfil  his  contracts, 
arrests  a  decline  at  a  point  above  that  which  it  would  reach  without 
his  interference. 

Unfortunately  for  the  reputation  of  the  Stock  Exchange — yet  possibly 
essential  to  its  fullest  operation  as  an  automatic  gauge  and  regulator — the 
dealings  on  it  are  not  confined  to  the  selling  of  securities  by  real  holders 
and  to  the  buying  of  them  by  investors.  Such  dealings  do  not  by  any 
means  constitute  the  whole  of  its  business,  and  if  they  did,  the  commis¬ 
sions  of  stock-brokers  would  not  suffice  for  the  living  expenses  of  the 
majority  of  them.  The  far  greater  part  of  the  transactions  on  the  Exchange 
are  speculative,  and  the  participants  in  them  are  not  only  brokers  acting 
on  their  own  account,  but  much  more  frequently  people  outside  of  the 
Exchange.  Orders  to  the  brokers  come  from  all  parts  of  the  country, 
mostly,  as  might  be  expected,  to  buy,  and  in  times  of  great  excitement 
lead  to  dealings  in  millions  of  shares  daily.  The  buyers  do  not  think  that 
the  securities  they  buy  are  really  worth  more  than  they  pay  for  them,  but 
only  that  they  will  be  able  to  resell  them  for  more;  while  the  “bear” 
sellers  count  upon  a  revulsion  in  the  buying  fever  which  will  enable  them 
to  cover  their  sales  at  a  profit.  Both,  therefore,  speculate  on  the  chances 
of  the  future.  Usually  the  buyers  for  a  rise  wait  too  long,  the  “bears” 
check  the  rise  and  turn  it  into  a  fall ;  or  the  fall  comes  naturally  from  a 
desire  which  seizes  the  mass  of  the  holders  of  securities  all  at  once  to  take 
their  profits  by  selling  out,  and  then  the  unlucky  operators  for  a  rise  have 
to  sell  for  less  than  they  gave.  On  the  other  hand,  the  “  bears  ”  sometimes 
sell  more  than  they  can  procure  for  delivery,  and  are  thus  “cornered,”  as 
it  is  said,  and  have  to  pay  dearly  to  extricate  themselves.  When  the  crisis 
comes,  either  way,  there  is  much  denunciation  of  the  practices  which  lead 
to  it,  but  this  soon  dies  away,  and  in  due  time  another  and  similar  crisis 
occurs. 

A  stock  exchange,  like  any  other  human  institution,  has  its  abuses  as 
well  as  its  uses ;  and  its  abuses,  if  not  more  serious  than  other  commercial 
evils,  are  peculiarly  subject  to  public  observation  and  comment.  All  the 


Z' 


THE  FUNCTIONS  OF  THE  STOCK  EXCHANGE 


11 


great  stock  exchanges  of  the  world  include  among  their  members  some 
who  are  neglectful  of  the  high  standards  of  trade  morality;  they  attract  to 
themselves,  also,  at  certain  periods,  a  crowd  of  those  adventurers — other 
mere  “knights  of  industry” — who  set  up  as  “bankers  and  brokers,”  and 
by  advertising  their  special  skill  and  information  induce  the  unwary  to 
entrust  their  savings  to  them  upon  the  hazard  of  the  market)//  These 
persons  solicit  business  from  anybody  and  everybody, — women,  clerks, 
small  tradesmen,  and  even  domestic  servants  who  have  saved  a  little 
money  out  of  their  wages,  and  are  dazzled  by  promises  of  doubling  and 
trebling  it  at  once.  The  best  majority  of  the  members  of  a  great  stock 
exchange  are  men  of  fidelity  and  repute,  and  look  upon  such  practices  very 
much  as  leading  lawyers  regard  the  tricks  of  pettifoggers.  It  may  be  said, 
moreover,  that  the  little  operators,  when  a  speculative  mania  sets  in,  do 
not  need  any  urging.  They  are  only  too  eager  to  try  their  luck,  and  are 
rarely  ruined  by  their  losses.  No  less  than  these,  men  who  possess  large 
fortunes  operate  in  stocks  very  much  as  they  bet  on  horse  races  or  play 
bridge  whist  and  poker.  They  love  the  excitement  of  the  game,  and  they 
at  least  get  this,  whether  they  lose  or  win. 

As  has  been  said,  the  New  York  Stock  Exchange  is  connected  by  tele¬ 
graph  and  telephone  wires  with  all  parts  of  the  country,  and  by  this  means 
a  vast  multitude  of  operators  pour  in  their  orders  upon  the  crowd  of 
brokers  who  occupy  its  floor.  How  this  concentration  upon  one  spot  of 
the  efforts  of  so  many  people  intensifies  the  excitement  in  dealings,  when¬ 
ever  there  is  any  excitement,  may  easily  be  seen.  Each  broker  embodies 
the  desires,  the  hopes,  and  the  fears  of  his  customers,  and  wields  a  mag¬ 
netic  force  many  times  greater  than  his  own.  Prices  go  up  and  go  down 
like  the  waves  of  the  sea  in  a  storm,  and  the  Exchange  becomes  a  whirl¬ 
pool  of  opposing  currents.  The  onlooker  wonders  that  brokers  can  endure 
the  strain  upon  them  without  breaking  down  mentally  and  physically. 

Outside  of  the  Exchange,  too,  when  the  market  is  active,  a  similar 
though  less  intense  interest  prevails.  The  majority  of  operators  being,  as 
has  beeji  said,  mere  votaries  of  chance,  are  easily  influenced  b}r  financial 
suggestions,  and  the  stronger  and  less  scrupulous  among  them  play  upon 
the  rest  by  all  sorts  of  arguments  and  rumors  calculated  to  affect  their 
actions.  Rises  and  falls  of  prices  are  produced  by  stories  which,  when 
investigated,  prove  to  be  false,  but  which,  none  the  less,  have  in  the 
meanwhile  as  much  effect  as  if  they  were  true.  Occasionally  such  stories, 
though  intrinsically  improbable,  turn  out  to  be  well  founded,  and  hence, 
naturally,  those  that  have  a  semblance  of  probability  are  received  with 
respect,  if  not  with  absolute  confidence.  The  crowd  is  thus  swayed  back¬ 
ward  and  forward  as  an  army  in  battle  is  by  the  result  of  its  collisions 
with  the  enemy  at  various  points  of  contact  with  it. 


12 


THE  NEW  YORK  STOCK  EXCHANGE 


Indeed, f operations  on  the  Stock  Exchange  have  many  points  of  resem¬ 
blance  with  war.  The  “ bulls”  are  arrayed  against  the  “bears,”  and  both 
parties  regard  all  measures  within  “the  rules  of  the  game”  as  lawful  to 
enable  them  to  win.  In  the  contest,  too,  as  in  the  conflict  of  armies,  will¬ 
power  and  intellectual  ability  are  important  factors,  j  The  effect  of  bayonet 
charges  and  artillery  fire  is  as  much  moral  as  physical.  Courage  some¬ 
times  enables  a  force  small  in  numbers  to  overcome  by  sheer  determination 
a  larger  one.  As  in  every  battle,  too,  there  comes  a  moment  when  one 
army  or  the  other  breaks  down  and  yields  from  the  exhaustion,  not  of  its 
physical  but  of  its  mental  strength,  so  in  “bull”  and  “bear”  campaigns 
panic  at  times  seizes  one  of  the  two  parties  and  drives  it  from  the  field. 
The  cause  of  the  panic  may  be  entirely  incommensurate  with  its  effect, 
but  the  confidence  which  it  destroys  also  far  exceeds  the  bounds  which 
facts  justify.  It  is  a  collision  of  soap  bubbles,  both  of  which  are  frail,  but 
of  which  one  is  less  frail  for  the  time  being  than  the  other. 

Much  as  this  prevalence  of  speculation  on  the  Stock  Exchange  may  be 
deplored,  there  seems  to  be  no  way  of  preventing  it.  To  suppress  the 
Exchange  in  order  to  do  it  would  be  like  cutting  off  a  man’s  head  to  cure 
his  headache.  It  would  not  even  be  akin  to  that,  since  it  would  leave 
in  operation  the  Produce  Exchange,  the  Cotton  Exchange,  the  Coffee 
Exchange,  and  all  the  other  exchanges  on  which,  notoriously,  speculation 
goes  on  to  an  enormous  extent.  Men  make  and  lose  millions  by  dealings 
in  grain,  cotton,  and  other  commodities,  as  well  as  irji  stocks,  and  closing 
all  the  exchanges  would  not  prevent  their  doing  it.  \  Even  real  estate  is 
the  subject  of  transactions  akin  to  gambling,  and  fortunes  are  gained  and 
lost  by  buying  and  selling  it,  as  well  as  in  buying  and  selling  personal 
property. 

To  the  moralist  looking  only  upon  the  superficial  aspects  of  stock 
speculation,  it  may  be  replied,  first,  that  nine  out  of  ten  of  its  victims  are 
the  class  that  seem  to  need  some  unpleasant  but  wholesome  experiences 
before  they  learn  the  lesson  that  the  profits  of  sturdy  labor  are  worth 
more  than  the  slippery  gifts  of  chance.  And  as  to  the  ethics  of  speculation 
itself,  it  is  undeniable  that  a  certain  gambling  propensity  is  much  more 
deeply  rooted  in  human  nature  than  those  who  seek  to  prevent  its 
indulgence  by  forcible  means  are  willing  to  admit.  It  is  as  old  and  as 
universal  as  the  propensity  to  use  stimulants,  which  has  existed  every¬ 
where  and  in  all  ages,  and  still  prevails  as  widely  as  ever.  From  the  days 
when  Noah  got  drunk  on  wine  down  to  the  present  time,  men  have 
indulged  not  only  in  wane,  but  in  beer,  opium,  hasheesh,  and  alcohol  and 
its  derivatives,  while  abstainers  from  these  exhilarants,  and  even  from 
tobacco,  do  not  disdain  tea  and  coffee,  which  produce  a  similar,  though 
milder,  effect.  In  the  same  way,  all  nations  have  had  and  still  have  their 


THE  FUNCTIONS  OF  THE  STOCK  EXCHANGE 


13 


familiar  modes  of  gambling.  It  is  only  a  few  years  since  lotteries  were 
fostered  by  laws  among  us,  and  they  are  still  sanctioned  in  some  parts  of 
Europe.  All  new  business  enterprises  are  in  the  nature  of  gambling,  since 
their  success  can  never  be  positively  assured  in  advance,  and,  as  experience 
shows,  they  fail  as  often,  at  least,  as  they  succeed.  Mining  ventures 
especially  are  uncertain,  and  while  some  of  them  richly  reward  those  who 
embark  in  them,  others  swallow  up  vast  sums  of  money  and  never  make 
any  return  for  it.  Commerce  by  sea  in  ancient  times  and  down  to  com¬ 
paratively  a  recent  period  was  extremely  hazardous,  and  while  a  successful 
voyage  paid  handsomely,  ships  and  their  cargoes,  like  those  of  “The 
Merchant  of  Venice,  ”  were  frequently  lost.  It  is  said,  with  a  show  of 
reason,  that  ninety-five  per  cent,  of  the  men  who  engage  in  regular 
mercantile  business  fail,  and,  certainly,  the  percentage  of  those  who  do 
not  succeed  in  the  liberal  professions  must  be  nearly  as  large. 

What  distinguishes  the  ventures  of  both  the  kings  and  the  commoners 
of  the  Stock  Exchange  from  those  of  men  who  stake  their  money  on  the 
cast  of  a  die  or  the  turn  of  a  card  is  that  individual  judgment,  study  of 
values,  and  discernment  of  financial  conditions  are  factors  of  real  impor¬ 
tance  in  stock  operations.  The  result  is  not  altogether  a  matter  of  chance. 
There  is  a  reasonable  basis  of  opinion,  and  the  skill  and  knowledge  often 
possessed  by  a  stock  speculator  may  be  worth  as  much  to  the  public  at 
large  as  is  the  intellectual  equipment  of  a  master  in  any  other  profession. 
For,  on  the  whole,  the  outcome  of  the  warfare  of  the  “bulls”  and  “bears” 
is  a  severely  scientific  test  of  values  by  which  the  safety  of  the  great  body 
of  investors  is  finally  promoted.  In  the  homely  phrasing  of  Adam  Smith, 
the  value  of  a  security  is  adjusted  finally  “not  by  any  accurate  measure, 
but  by  the  higgling  and  bargaining  of  the  market.” 

The  Stock  Exchange,  therefore,  cannot  justly  be  charged  with  creating 
the  passion  for  gambling,  nor  with  affording  the  only  means  of  its  indul¬ 
gence.  That  its  legitimate  function  can  be  perverted  to  evil  ends  is  a 
defect  which  it  shares  in  common  with  all  human  devices  and  even  with 
the  elements  of  nature.  Fire,  which  is  so  good  a  servant,  is  an  equally  bad 
master.  Water,  that  quenches  the  thirst,  also  quenches  the  spark  of  life  in 
drowning  man.  The  air,  which  in  gentle  motion  is  a  refreshing  breeze, 
frequently  becomes  a  destructive  hurricane.  The  knife  of  the  honest  work¬ 
man  may  be  used  to  commit  a  murder.  Explosives  like  gunpowder  and 
dynamite  can  be  made  instruments  of  vengeance,  and  the  beneficent  drugs 
of  the  physicians  may,  accidentally  or  intentionally,  destroy  life.  To  this 
rule  the  Stock  Exchange  is  no  exception,  and  were  it  to  be  abolished, 
because  of  the  evil  accomplished  by  its  aid,  then  its  functions  for  good 
would  also  cease.  What  this  would  mean  is  a  problem  scarcely  to  be 
considered  at  the  present  stage  of  our  imperfect  but  highly  complex 


14 


THE  NEW  YORK  STOCK  EXCHANGE 


civilization.  The  immediate  effect  would  be  nothing  less  than  the 
upsetting  of  existing  financial  systems.  Governments  as  now  con¬ 
stituted  would  suffer  in  common  with  the  holders  of  property  which 
could  not  be  utilized.  Enterprises  and  construction,  upon  which  depend 
the  growth  of  people  and  their  welfare,  would  be  brought  to  naught. 
After  the  convulsion  a  readjustment  might  in  time  ensue,  and  some¬ 
thing  better  be  discoverable.  But  there  would  first  be  ruin,  and  a  long 
break  in  the  evolution  of  the  general  weal  to  which  mankind  looks 
hopefully  forward. 


*1 


II 

HISTORY  OF  THE  NEW  YORK 
STOCK  EXCHANGE 


EDMUND  C.  STEDMAN 

AND 


ALEXANDER  N.  EASTON 


A  PROPHECY  FOR  AMERICA 


From  “An  Astronomical  Diary,  or  an  Almanac 
for  the  Year  of  our  Lord  Christ,  1 758.” 


“Thirdly,  of  the  future  state  of  North  America. — Here  we  find  avast 
stock  of  proper  materials  for  the  art  and  ingenuity  of  man  to  work  upon : — 
Treasures  of  immense  worth;  concealed  from  the  poor,  ignorant  aboriginal 
natives  !  The  curious  have  observed  that  the  progress  of  human  literature 
(like  the  sun)  is  from  the  East  to  the  West;  thus  has  it  travelled  through  Asia 
and  Europe,  and  now  is  arrived  at  the  eastern  shore  of  America. 

“As  the  celestial  light  of  the  Gospel  was  directed  here  by  the  finger  of 
God,  it  will  doubtless  finally  drive  the  long,  long  night  of  heathenish  darkness 
from  America.  So  arts  and  sciences  will  change  the  face  of  nature  in  their  tour 
from  hence  over  the  Appalachian  Mountains  to  the  Western  ocean;  and  as 
they  march  through  the  vast  desert,  the  residence  of  wild  beasts  will  be  broken 
up,  and  the  obscene  howl  cease  forever;  instead  of  which  the  stones  and  trees 
will  dance  together  in  the  music  of  Orpheus, —  the  rocks  will  disclose  their  hid¬ 
den  gems, —  and  the  inestimable  treasures  of  gold  and  silver  be  broken  up. 
Huge  mountains  of  iron  ore  are  already  discovered;  and  vast  stores  are 
reserved  for  future  generations. 

“  This  metal,  more  useful  than  gold  and  silver,  will  employ  millions  of 
hands,  not  only  to  form  the  martial  sword  and  peaceful  share  alternately,  but 
an  infinity  of  utensils  improved  in  the  exercise  of  art  and  handicraft  among 
men.  Nature  through  all  her  works  has  stamped  authority  on  this  law, 
namely,  ‘That  all  fit  matter  shall  be  improved  to  its  best  purpose.’  Shall  not 
then  those  vast  quarries  that  teem  with  mechanic  stone, — those  for  structure 
be  piled  into  great  cities,— and  those  for  sculpture  into  statues  to  perpetuate 
the  honor  of  renowned  heroes;  even  those  who  shall  now  save  their  country? 
0 !  ye  unborn  inhabitants  of  America !  should  this  page  escape  its  destined 
conflagration  at  the  year’s  end,  and  these  alphabetical  letters  remain  legible,— 
when  your  eyes  behold  the  sun  after  he  has  rolled  the  seasons  round  for  two  or 
three  centuries  more,  you  will  know  that  in  Anno  Domini  1758,  we  dreamed 
of  your  times.” 


Nathaniel  Ames.  1703-1764. 


II 

HISTORY  OF 

THE  NEW  YORK  STOCK  EXCHANGE 

I 

EARLY  DAYS  IN  MANHATTAN 

N  tracing  the  history  of  any  institution  closely  linked  with  the 
growth  of  this  country  the  observer  is  likely  to  experience 
a  singular  fascination  which  is  more  easy  to  feel  than  to 
define.  He  notices  a  peculiar  freshness  of  atmosphere,  a 
hardy  freedom  from  the  restraint  of  old  conventions,  a  cer¬ 
tain  evidence  of  strong  and  pulsating  vitality,  which  readily 
combine  to  garnish  the  story  with  attraction.  These  conditions,  Americans 
are  glad  to  believe,  typify  Americanism.  They  lend  a  vivid  color  even  to 
the  sober  hues  of  financial  records.  They  infuse  with  a  new  T  ,  ,  .  , 

life  of  enthusiasm  and  vigor  pages  that  otherwise  might  have  American  institu- 
been  dry,  and  they  heighten  the  dramatic  effects  of  incidents  tions  illustrated 
that  are  already  strong.  Certainly  no  one  can  doubt  that  h->  thishistoi^. 
the  history  of  the  New  York  Stock  Exchange  bears  witness  to  the  truth 
of  these  assertions. 

Beyond  a  doubt  there  are  other  more  important  features  of  that 
history.  Its  bearing  upon  economic  and  political  questions  and  upon 
the  development  of  trade  and  commerce  means  much  more  to  the  student. 
But  the  dash  of  Americanism  that  infuses  it  all — the  natural  index  of  a 
vigorous  people  engaged  in  developing  a  country  of  enormous  resources 
under  the  guidance  of  new  ideas  and  progressive  conditions — cannot 
be  neglected  by  any  one  who  desires  to  know  and  understand  the  whole 
story. 


18 


THE  NEW  YORK  STOCK  EXCHANGE 


To  deny  that  the  Stock  Exchange  is  intimately  linked  with  the  develop¬ 
ment  of  this  country  stamps  a  man  as  ignorant  of  the  very  causes  of  its 
being ;  yet  the  stubborn  fact  remains  that  to  many  thousands  of  men  in 
all  parts  of  the  United  States  it  represents  simply  a  gigantic  speculative 
whirlpool,  with  shoals  of  foolish  gamblers  spinning  toward  its  vortex  and 
a  small  and  select  body  of  astute  financiers  at  the  inmost  coil.  This  view 
is  shared,  furthermore,  by  a  large  number  of  those  local  unfortunates  who 
may  be  described  as  hangers-on  of  the  market — “glued  to  the  ticker”  after 
they  have  exhausted  every  reasonable  possibility  of  getting  anything  but 
useless  experience  out  of  their  pursuit. 

The  aphorism,  “Prices  don’t  respond  to  conditions;  they  respond  to 
manipulation,”  is  discovered  in  more  mouths  than  the  casual  reader  might 
fancy.  This  is  not  the  place  to  discuss  the  truth  or  falsehood  contained 
in  that  statement.  Students  of  the  history  of  the  Exchange  will  find 
plenty  of  material  on  which  to  base  their  own  conclusions. 

But  while  not  essaying  an  economic  treatise,  it  is  proper  to  indicate, 
at  the  start,  the  underlying  reasons  for  the  rise  and  growth  of  the  Stock 
Exchange.  It  was  the  legitimate  and  natural  product  of  the  commercial 
development  of  this  city,  and  in  time  it  has  come  to  sustain  just  such  a 
Causes  of  the  relation  to  America  as  that  which  it  was  created  to  sustain 
rise  and  growth  to  New  York.  Like  the  market  for  hay  or  fish,  the  stock 
of  the  Exchange.  market  arose  simply  because  buyers  and  sellers  wanted  a 
common  place  of  meeting.  The  commodities  they  dealt  in  were  investments, 
measured  in  par  values  of  stocks  and  bonds  instead  of  in  bales  or  pounds, 
but  responding  to  precisely  the  same  conditions  that  traders  of  all  sorts 
had  known  for  centuries.  The  addition  of  a  loan  market,  and  of  such 
complications  as  speculative  ingenuity  might  provide  for  its  own  delight, 
simply  helped  to  differentiate  the  Stock  Exchange  from  all  other  marts. 

If  the  Exchange  had  been  nothing  more  than  a  meeting-place  for 
buyers  and  sellers  of  securities,  and  the  borrowers  and  lenders  of  funds 
based  on  securities  —  a  huge  automatic  dial  to  register  vibrating  values, 
and  a  legalized  centre  of  speculation — it  would  even  then  have  been 
worthy  of  an  important  place  in  the  national  annals.  But  though  created 
only  for  these  functions,  it  has  come  to  discharge  another  and  a  more 
striking  one.  In  so  doing  it  has  formed  that  connection  with  the  country’s 
development  which  may  be  reckoned  the  most  valuable  feature  of  its 
history.  It  is  now  the  mainstay  of  the  builders  of  steel  highways  and 
our  industrial  enterprises.  The  maker  of  railroads,  like  the  maker  of 
shoe-strings,  needs  a  market.  The  one  finds  this  in  the  Stock  Exchange,  as 
the  other  is  accommodated  by  the  pedler’s  tray.  The  marvellous  system 
of  rails  and  ties,  which  promotes  progress  by  promoting  communication 
and  trade,  has  been  made  possible,  largely  because  its  authors  knew  a 


EARLY  DAYS  IN  MANHATTAN 


19 


place  wherein  to  find  buyers  of  their  wares.  As  time  has  passed,  the 
architects  of  huge  industrial  enterprises  have  reaped  a  like  advantage.  It 
has  been  all  one,  whether  men  were  projecting  railway  or  street-car  or 
ferry  lines,  copper-mines  or  steel-mills ;  they  have  no  more  confined  their 
energies  to  creating  investments  for  themselves  than  do  the  professional 
builders  of  tenements.  They  have  needed  buyers,  and  the  Stock  Exchange 
has  developed  by  degrees  to  meet  their  need. 

The  Exchange  started  in  a  community  which  inherited  from  both  the 
Dutch  and  the  English  civilizations,  and  the  names  of  its  founders  indicate 
blood  of  both  races.  It  rose  in  odd  fashion.  Born  in  1792,  it  appeared  to 
languish  for  awhile,  and  twenty-five  years  afterward  it  experienced  a 
second  birth.  Its  active  life  really  dates  from  1817.  What  may  be  called 
its  pre-natal  history — if  the  reader  will  forgive  a  somewhat  fanciful 
expression — deserves  our  attention  as  well.  Even  the  annals  of  New 
Amsterdam  may  throw  some  light  upon  the  beginning  of  this  institution. 


a 


Manhattan  under 
the  early  Dutch. 


ISCOVERED  in  1609  by  Hudson,  then  in  the  employ  of  the  Dutch 
West  India  Company,  Manhattan  Island  was  sparsely  settled  three 
years  later  by  the  Dutch.  They  founded  the  colony  which  has 
since  been  popularly  known  as  New  Amsterdam.  Peter 
Minuit’s  purchase  of  the  land  for  the  equivalent  of  twenty- 
four  dollars — a  tale  familiar  to  modern  school-children  — 
took  place  in  1626.  An  arbitrary  government  by  the  West  India 
Company  followed.  The  community  was  God-fearing,  industrious,  and 
bigoted.  It  fought  the  Indians  and  wild  beasts  with  courage,  and 
punished  its  own  offenders  with  barbarous  rigor.  It  had  a  minister,  but 
boasted  no  special  school  building.  The  levy  of  a  tax  of  one  beaver-skin 
for  each  house  and  one  guilder  for  each  chimney  supported  the  fire 
apparatus.  Police  protection  was  provided  by  a  city  watch  at  night,  a 
heritage  later  bequeathed  to  the  English  government  of  the  community. 
Its  currency  was  chiefly  of  beads  (seawant)  and  beaver-skins. 

These  early  Manhattanese  developed  a  gift  for  combat  (no  doubt  by 
dint  of  differences  with  their  redskin  neighbors)  which  shows  plainly  in  their 
judicial  records,  despite  their  piety.  Director-General  Petrus  Stuyvesant, 
of  the  wooden  leg  and  irritable  temper,  had  to  issue  a  repressive  order.  On 
the  score  that  “  Wliereas  we  have  observed  and  remarked  the  insolence 
of  some  of  our  inhabitants,  who  are  in  the  habit  of  getting  drunk  . 
and  of  smiting  each  other  on  the  Lord’s  Day  of  Rest,  of  which  on  last 
Sunday  we  ourselves  witnessed  the  painful  scenes,”1  he  directs  with 


1  Records  op  the  City  of  New  Amsterdam  in  New  Netherland  :  Henry  B.  Dawson.  Published  by 
permission  of  the  Common  Council  of  the  City.  1867. 


20 


THE  NEW  YORK  STOCK  EXCHANGE 


Penal  severity. 


paternal  solicitude  that  no  wine  or  beer  shall  be  sold  on  the  Sabbath  before 
two  o’clock  in  the  afternoon,  and  none  before  four  o’clock  when  there  is 
preaching.  In  an  order  dated  December  25,  1657,  it  is  noted  that  the 
pugnaciously  inclined  have  been  wont  to  “twit  the  officers”  with  the  fact 
that  the  fine  for  the  indulgence  in  the  pleasing  pastime  of  fighting  is  only 
“One  Pound,  Flemish  (in  seawant).”  To  remedy  the  existing  lawlessness, 
a  fine  of  twenty-five  guilders  (ten  dollars)  for  a  single  blow  of  the  fist,  and 
one  hundred  guilders  if  blood  be  drawn,  is  imposed.  As  to  whether 
fighting  was  therefore  confined  to  the  wealthy  classes  the  records  are 
mute. 

The  Court  of  the  Burgomasters  and  Schepens — the  city’s  board  of 
magistrates — punished  the  failings  of  their  fellow-men  with  severity.  An 
edifying  sample  of  the  early  Dutch  brand  of  justice  figures  in  the  records 
of  1644.  An  incontinent  citizen,  one  Jasper  Abrahamson, 
forcibly  entered  a  house  and  demanded  food  and  liquor,  lay¬ 
ing  particular  stress  upon  the  latter.  He  appeared  to  have  done  no  special 
harm,  except  to  the  community’s  sense  of  propriety,  but  he  was  sentenced 
“to  be  fastened  to  a  stake  and  severely  scourged,  and  a  gash  to  be  made 
in  his  left  jaw  or  cheek,  and  then  to  be  banished  from  the  city  for  twenty- 
five  years,  and  ”—tlie  final  phrase  betrays  the  touch  of  an  artist  —  “to  pay 
the  costs.”1 

It  was  in  this  year  (1644)  that  the  Dutch  director-general  ordered  the 
improvement  which  first  marked  the  locality  of  the  street  destined  to 
become  the  most  famous  thoroughfare  of  America.  He  bade  the  citizens 
to  build  a  stout  brushwood  fence  across  the  island  on  a  line  with  Wall 

Street’s  present  northerly  boundary,  to  keep 
the  Indians  out  and  the  cattle  in.  Whoso 
shirked  his  part  of  the  duty  was  to  forfeit  the 
right  to  pasture  his  animals  on  the  common 
south  of  the  fence. 

While  the  fence  might  keep  out  the 
Indians,  the  community  felt  that  some¬ 
thing  better  was  needed  to  keep  out  the 
English.  Out  of  this  feeling  sprang  the 
wall  that  gave  its  name  to  the  street 
now  identified  with  the  New  York  Stock 
Exchange  throughout  the  civilized  world. 

Cromwell,  having  provided  an  end  for  the  troubles  of  Charles  I,  was 
engaged  in  making  trouble  for  Holland  in  1652,  and  the  settlers  of  New 
England  looked  on  New  Amsterdam  with  such  longing  as  the  followers  of 
Moses  felt  for  the  land  of  Canaan.  The  Dutch  Settlers  of  Manhattan 


SECTION  OF  THE  CITY  WALL,  1653. 


1  Wall  Street  in  History:  Martha  J.  Lamb.  New  York.  1883. 


EARLY  DAYS  IN  MANHATTAN 


21 


learned  that  an  expedition  was  likely  to  be  made  against  them,  and  the 
wall,  or  cingel,  was  promptly  built  in  place  of  the  old  brushwood  fence,  to 
keep  out  the  invader.  It  was  constructed  of  round  palisades,  Building  of  the 
seventeen  feet  long  and  eighteen  inches  in  girth,  sharpened  at  wail  to  keep  out 
the  top  and  sunk  along  what  is  now  the  northerly  boundary  tbe  Engllsh- 
of  Wall  Street  and  westerly  to  the  Hudson  River,  in  a  line  interrupted 
at  intervals  by  posts  twenty-one  inches  in  girth,  to  which  rails  were 
nailed  two  feet  below  the  top  of  the  palisades.  The  industrious  Dutchmen 
threw  up  a  sloping  breastwork  four  feet  high,  three  feet  wide  at  the  top, 
and  four  feet  wide  at  the  bottom,  inside  the  palisades,  taking  the  earth 
from  a  ditch  two  feet  deep,  three  and  a  half  feet  broad,  and  two  and  a  half 
feet  inside  the  breastwork. 

The  wall  was  completed  on  May  1,  1653,  at  a  cost  of  3,166  guilders 
(about  $1,266),  raised  on  loans  without  security.  It  was  one  hundred  and 
eighty  rods  long,  and  ran  from  the  Hudson  past  the  Great  Highway 
(Broadway),  where  the  Land  Gate — which  served  for  dwellers  on  the 
“bouweries”  near  the  future  site  of  City  Hall  Park — was  placed,  to  Pearl 
Street,  then  at  the  water’s  edge,  where  the  Water  Gate  was 
built.  Front  and  Water  i  streets  were  later  reclaimed  from  the  East 
River.  The  Heere  Graft,  J|  a  canal  that  had  replaced  a  ditch,  ran 


VIEW  OF  WATER  GATE.  1653. 


River,  at  this  time,  navigable  by  sculling-boats  and  properly  bridged.  In 
1674  it  was  filled  in. 

Cromwell  made  peace  with  Holland  in  time  to  prevent  the  threatened 
invasion  of  Manhattan  Island.  The  wail,  however,  was  strengthened  and 
heightened  ten  or  twelve  feet  in  1655,  to  prevent,  we  are  told,  the  over- 
loopen 1  of  the  savages,  who  were  capable  of  breaking  all  vaulting  records 
theretofore  known  to  the  Dutch. 

iThe  Early  History  of  Wall  Street:  Oswald  G.  Villard.  New  York.  1897. 


22 


THE  NEW  YORK  STOCK  EXCHANGE 


EjgjjO  adequate  history  of  this  little  Dutch  colony— even  in  outline— 
could  omit  some  mention  of  the  financial  system  of  the  day.  Its 
crudity  becomes  all  the  more  startling  when  placed  in  contrast 
with  the  intricate  development  of  the  modern  monetary  machine.  This 
contrast  is  heightened  by  reason  of  the  fact  that  the  very  Ear]y  financial 
community  of  which  these  sturdy  Hollanders  were  the  fore-  conditions— 
bears  is  to-day  the  money  centre  of  the  Western  Hemis¬ 
phere  and  rapidly  rising  toward  the  first  position,  from  the 
financial  point  of  view,  among  cities  of  the  world.  It  is  curious  to  note 
that  the  principles  which  govern  the  money  market  to-day  obtained  as 
faithfully  in  the  days  of  Petrus  Stuyvesant  as  now. 

The  money  system  of  the  United  States,  whose  development  through 
two  centuries  and  a  half  bears  strongly  on  the  story  of  the  Stock  Exchange, 
had  the  Atlantic  seaboard  for  its  cradle  and  the  original  American  for  its 


the  eeawant 
currency. 


sponsor.  It  resembled  this  continent,  in  fact,  through  having  been  appro¬ 
priated  in  an  open-handed  fashion  from  the  savage.  Wampumpeague — 
known  in  New  Amsterdam  as  seawant — was  its  early  basis,  and  the  ratio 
of  beaver-skins  in  1634  to  white  seawant  was  nine  hundred  and  sixty 
to  one.  Seawant  consisted  of  beads  made  of  sea-shells  by  the  Indians, 


those  of  Long  Island  turning  out  the  finest  product.  John  Jacob  Astor 
used  it  for  the  purchase  of  his  furs.  That  portion  of  the  shell  from  which 
the  black  or  purple  beads  could  be  made  was  comparatively  small,  and  so 
it  resulted  that  the  dark  seawant  was  twice  as  valuable  as  the  white. 
Here,  too,  the  first  temptation  to  counterfeiting  arose.  Criminals  of  the 
seawant  generation  dyed  the  white  beads  black  to  double  their  value,  as 
their  modern  successors  fashion  ten-dollar  bills  from  pieces  of  those  of 
smaller  denominations. 

The  original  users  of  seawant — the  Indians — were  wont  to  offer  it  as 
a  religious  sacrifice.  They  would  tie  strings  of  black  and  white  beads 
about  the  neck  of  a  white  dog,  suspended  to  a  pole,  as  a  tribute  to  the  God 
of  the  Five  Nations.1 

Massachusetts  made  the  shell  beads  legal  tender  about  1641,  or  nine 

1  History  of  New  York:  Yates  and  Moulton. 


EARLY  DAYS  IN  MANHATTAN 


23 


years  before  she  established  a  mint  for  the  coinage  of  the  pine-tree  shilling. 
It  was  in  1641  that,  the  officials  of  the  province  of  New  Amsterdam — where 
the  first  mention  of  legal  currency,  seven  years  previous,  had  referred  to 
seawant — gave  public  expression  to  the  fear  that  the  exportation  of  specie 
might  prove  an  injury  to  the  community.  The  basic  money  had  shown 
symptoms  of  deterioration,  and,  as  the  debtor  and  the  buyer  hastened  to 
pay  in  the  inferior  coin,  the  better  quality  was  becoming  exiled.  To  quote 
Hardenbrook  in  his  “Financial  New  York”: 

“An  ordinance  in  council  .  .  .  was  enacted  under  the  Dutch 

Governor  Kieft,  which  recited  that  a  vast  deal  of  bad  seawant,  or  wam- 
pumpeague,— ‘ nasty  rough  things  imported  from  other  places’— was  in 
circulation,  while  the  ‘good  splendid  seawant,’  usually  called  Manhattan 
seawant,  was  out  of  sight  or  exported,  ‘which  must  cause  min  to  the 
country.’  ...  In  1660  the  seawant  currency  became  debased 
and  counterfeits  sprang  up,  and  in  1662  it  was  still  further  depreciated ; 
but  after  the  loss  of  the  colony  by  the  Dutch,  in  1664,  its  price  increased 
four  hundred  per  cent.,  and  some  lucky  Wall  Street  speculators  made 
fortunes.” 

To  remedy  the  condition  which  excited  Kieft’s  apprehension,  it  was 
ordered  that  coarse  white  seawant  should  pass  current  at  six  for  a  Dutch 
stiver  and  four  well-polished  white  seawant  should  be  rated  at  four  for 
a  stiver.  Whoever  trampled  on  this  ordinance  by  receiving  the  seawant 
at  a  less  valuation  should  pay  ten  guilders  (four  dollars)  to  the  poor. 

In  seawant  the  New  York  public  saw  its  first  illustration  of  a  “corner,” 
a  sort  of  miniature  predecessor  of  the  terrific  operations  in  the  gold 
market  that  a  later  generation  knew  to  its  sorrow.  Frederick  Philipse, 
the  richest  man  of  his  day,  created  this  corner  in  1666,  which,  as  we 
shall  presently  see,  was  in  the  first  interval  of  English  rule. 

Thpfirflt  *  * 

Mynheer  Philipse  had  judiciously  “plaD ted”  great  quantities 
of  seawant,  operating  for  a  rise.  The  rise  came.  The  beads  jumped  to 
three  times  their  former  value  in  silver,  and  those  who  had  contracted 
to  pay  their  obligations  in  seawant  had  to  buy  it  of  the  far-seeing 
Philipse,  and  to  suffer  considerable  loss  in  the  buying.1 

The  financial  affairs  of  the  old  Dutch  community  indicated  a  pastoral 
simplicity  in  the  people.  Hendrick  Hendrickse,  the  “city  drummer,”  the 
records  of  the  Burgomasters  and 
Schepens  tell  us,  applied  on  one 
occasion  for  his  salary,  amounting 
to  forty  guilders  (sixteen  dollars), 
and  was  bidden  to  wait  awhile,  “as 

there  is  no  money  in  the  chest  at  D0CK  AND  KIVEB  FR0NT  T0  WALL  street.  1667. 

1  Financial  New  York:  William  Ten  Eyck  Hardenbrook.  New  York.  1899. 


24 


THE  NEW  YORK  STOCK  EXCHANGE 


present.”  Popular  notions  of  the  nature  of  all  other  obligations  seem  to 
have  been  equally  primitive.  The  Burgomasters  contracted  with  the 
redoubtable  Stuyvesant  at  one  time  to  pay  the  town  minister,  dog-whipper 
(sexton),  schoolmaster,  and  other  important  functionaries  the  salaries 
previously  paid  by  the  Dutch  AVest  India  Company,  in  consideration  of 
being  allowed  to  collect  for  the  use  of  the  colony  certain  taxes  on  intoxi¬ 
cating  beverages,  etc.,  which  the  company  had  been  accustomed  to 
pocket.  Stuyvesant  evidently  could  make  a  bargain  as  well  as  a  prayer. 
The  Burgomasters  soon  discovered  that  the  salaries  they  would  have  to 
pay  would  exceed  the  value  of  the  tax  they  could  levy  by  some  sixty-six 
per  cent.  They  were  equal  to  the  occasion.  The  tax  was  collected,  and 
when  the  spiritual  adviser  of  the  community  and  his  distinguished  asso¬ 
ciates  came  to  claim  their  stipends,  the  City  Fathers  amiably  informed 
them  that  the  money  was  all  spent.  Like  the  hopeful  Hendrickse,  they, 
too,  had  to  wait  awhile. 


BUT  Dutch  government  and  finance  in  New  Amsterdam,  like  other 
more  pretentious  institutions,  came  in  due  season  to  an  end.  In  1664 
the  Duke  of  York  (afterward  James  II  of  England),  having  received 
from  Charles  II  the  right  to  appropriate  another  nation’s  property,  sailed 
with  a  fleet  to  New  Amsterdam  and  surprised  and  captured  the  town. 

Charles  II  has  come  down  to  posterity  as  the  monarch  “who  never  said 
a  foolish  thing  and  never  did  a  wise  one.”  Wisdom,  of  the  purely  selfish 
variety,  cannot  be  denied,  however,  to  the  decision  that  permitted  the 
easy  capture  of  Manhattan  Island.  The  Duke  called  the  province,  which 
then  contained  fifteen  hundred  souls,  New  York.  He  quartered  his  English 
Manhattan  soldiers  on  the  citizens,  eighty  cents  (two  guilders)  a  week 
island  ceded  to  being  paid  for  each  man’s  board.  Nine  years  later  the  Dutch, 
England,  a.  d.  by  a  naval  coup  audacious  as  his  own,  recaptured  the  com¬ 
munity.  The  following  year,  1674,  Holland  ceded  Manhattan 
Island  to  England  by  treaty.  These  entire  proceedings  cost  no  blood¬ 
shed,  and  proved  quite  incapable  of  disturbing  the  phlegm  of  the  Dutch 
population. 

Major  Edmund  Andros,  who  had  fought  under  Prince  Rupert  against 
the  commonwealth,  came  out  from  England  to  take  the  governorship  of 
the  reclaimed  colony.  In  the  century  of  English  rule  that  followed,  the 
community  not  only  progressed  with  remarkable  vigor,  but  nurtured  a 
spirit  of  independence  that  did  not  wait  till  the  outbreak  of  the  Revolution 
to  vaunt  itself  in  the  face  of  the  ruling  nation.  The  infusion  of  the 
constantly  growing  proportion  of  English  blood  was  a  logical  result  of 
the  session  of  the  colony  by  the  Dutch.  The  expanding  population  of 


EARLY  DAYS  IN  MANHATTAN 


25 


New  York  throve  under  more  favorable  conditions  than  had  existed  beneath 
the  rule  of  Stuyvesant  and  his  compeers.  Indian  invasions  became  merely 
a  memory.  The  fact  that  neighboring  and  flourishing  provinces  also  pro¬ 
fessed  fealty  to  Great  Britain,  and  that  the  province  of  New  York  had 
thereby  ceased  to  be  a  stranger  _  in  a  strange  land,  encouraged 

England  to  Man- 
and  swelled  the 
tion  and  wealth 
the  Hudson’s 


OLD  CITY  HALL,  WALL  STREET, 
BEFORE  THE  REVOLUTION. 


Thomas  Dongan, 
Limerick,  whose 
by  the  charter 
name  and  by  a 
aggrandizement, 
in  1683.  The 


Governor  Don¬ 
gan  gives  New 
York  a  charter, 
but  steals  four- 
ten  ths  of  Wall 
Street. 


emigration  from 
hattan  Island 
growth  in  popula 
of  the  colony  at 
mouth. 

Governor 
afterward  Earl  of 
rule  was  marked 
that  bears  his 
policy  of  self- 
reached  New  York 

Dongan  charter  was  given  to  the  city  three  years  later,  and  vested  in 
the  municipality  the  ownership  of  its  own  ferry  franchises  and  vacant 
land.  This  document  was  a  natural  product  of  the  current 
theory  that  the  real  property,  even  of  a  colony,  was  a  per¬ 
sonal  asset  of  the  crown  to  which  that  colony  professed 
allegiance.  New  Yorkers  of  a  later  generation  helped,  with 
free  expenditure  of  blood  and  treasure,  to  wipe  out  that 
theory  so  far  as  it  concerned  them ;  but  they  did  not  unseat  the  Dongan 
charter  from  the  throne  of  its  authority.  The  theory  has  been  abrogated 
but  its  effect  remains,  just  as  to-day  the  riparian  rights  about  City  Island, 
granted  by  Queen  Anne  to  a  favorite  family  of  her  day,  still  hold  good  for 
the  benefit  of  the  descendants  of  the  grantees. 

Nicholas  Bayard,  the  first  Mayor  of  this  city,  ordered  in  1685  that  it 
be  paved,  each  citizen  to  pave  the  walk  in  front  of  his  own  premises.  The 
first  thoroughfare  ever  paved  in  Manhattan  Island  was  Brower  (now 
Stone)  Street,  between  Whitehall  and  Broad  streets,  this  survey  of  the 
having  been  done  under  Dutch  rule.  Wall  Street,  which  was  northerly  line, 
first  paved  in  1693  for  a  width  of  ten  feet,  in  front  of  the  houses  facing 
on  the  Wall,  was  surveyed  ip  1685  by  Leo  Beckwith.  He  laid  out  the 
northerly  line  of  the  thoroughfare,  “by  vartue  of  a  warrant  from  the 
honble  Coll.  Tho.  Dongan  Gouavnor  Generali  of  his  Majesty’s  Coll,  of  New 
York,”  and  it  ran  from  “ye  westermost  corner  of  ye  Butcher’s  Pen  at  an 
angle  of  313°,  or  northwest  by  West  nine  degrees  fifteen  minutes  four 
hundred  and  twenty  three  feet  to  the  farthest  corner  of  Smyth’s  Street : 
thereby  an  angle  of  323°  four  hundred  and  thirty  one  feet  to  the  farthest 
corner  of  Grac-ht  (Broad)  Street  and  from  there  to  an  angle  of  319° 


26 


THE  NEW  YORK  STOCK  EXCHANGE 


the  line  run  one  hundred  and  fifty  one  feet  to  the  farthest  corner  of 
Stoulenberg’s  garden,  which  is  right  opposite  to  the  Southeast  corner  of 
ye  New  Street,  the  saide  Street  being  laide  at  thirty  six  foot  in  breadth.” 
Mr.  Beckwith  stamped  the  product  of  his  engineering  and  literary  genius 
as  follows:  “ Performed  this  16th  day  of  December,  1685,  by  Mee,  Leo 
Beckwith,  Dept.  Suryeior.” 


Wall  Street’s  north  ^  erly  line  is  thus  accounted  for.  ‘‘  The 

honble  Coll.”  Thomas  Dongan  attended  to  the  southerly 


STADTHUYS. 


boundary  himself.  The  thoroughfare  was  one  hundred  feet  wide  at 
Thus  Wail  street  the  time,  the  Dutch  having  forbidden  the  building  of  houses 
became  only  within  that  distance  of  the  wall.  Governor  Dongan,  no 
sixty  feet  wide.  foreseeing  the  value  which  would  be  set  in  a  later 

day  upon  space  in  the  financial  district,  concluded  that  it  was  a  godless 
waste  of  room  to  keep  Wall  Street  so  wide.  He  accordingly  cut  off  a 
strip  forty  feet  wide  from  the  southerly  part  of  the  thoroughfare  and 
sold  it  to  Abraham  De  Peyster,  Nicholas  Bayard,  and  others.  The 
proceeds  he  quietly  put  away  where  they  could  not  tempt  the  eyes  of 
the  covetous  and  worldly-minded.  This  piece  of  robbery  was  committed 


EARLY  DAYS  IN  MANHATTAN 


27 


with  impunity,  but  trivial  offences  were  severely  punished.  Even  at  a 
later  period  we  learn  that  petty  thieves  were  disciplined  by  the  burning 
of  the  letter  T  into  their  left  cheeks. 

Wall  Street’s  first  house  of  any  note  was  built  on  the  site  of  the 
present  Custom  House  at  Wall  and  William  streets.  Jacob  Jansen 
Moesman  erected  it  on  a  thirty-foot  lot.  Trinity  Church  was  built  in 
1796.  The  wall  was  a  favorite  social  rendezvous  in  these  early  days, 
and  one  of  the  English  ordinances  provided  a  small  fine  for  “  Youthes, 
maydes  or  other  persons  ”  who  met  there  on  Sunday  for  sport  or  play. 
The  wall  lasted  till  the  advent  of  a  new  City  Hall  marked  a  new  era  in  the 
development  of  New  York.  The  old  Stadt  Huys  had  been  erected  by  the 
Dutch  in  1642  on  what  is  now  the  site  of  71  and  73  Pearl  Street.  This 
venerable  structure  was  sold  to  John  Rodman,  a  merchant,  at  the  respect¬ 
able  figure  of  £920,  shortly  after  the  completion  of  the  new  City  Hall, 
which  was  built  on  a  lot  donated  for  the  purpose  by  Abraham  De  Peyster, 
the  site  of  the  present  Sub-Treasury,  facing  the  head  of  Broad  Street. 

In  1698,  when  this  new  ornament  to  the  city  was  projected,  the 
residents  asked  the  Governor  to  remove  the  wall,  which  had  outlived  its 
possible  usefulness  without  ever  having  been  tested  in  battle.  The  petition 
was  granted.  The  veteran  “Cingel”  was  demolished,  and  _  ,  „  , 

it  ,  ,,  -itt  ^  ,  Removal  of  the 

from  the  Land  Gate  and  the  Water  Gate,  whose  strength  wail,  and 

Petrus  Stuyvesant  had  surveyed  with  satisfaction,  the  stone  building  of  a 

bastions  were  taken  to  make  the  new  City  Hall.  In  the  fall  of  ne™  Cltt'  HaIL 

1699  the  corner-stone  of  the  municipal  building  was  laid,  the  structure 

being  completed  the  following  year.  The  day  of  Indian  warfare  had  given 

way  to  the  day  of  commercial  activity. 

There  was,  however,  much  that  was  primitive  and  crude  in  the  govern¬ 
mental  arrangements  of  this  period.  Streets  were  artificially  lighted  at 
night  only  in  the  dark  time  of  the  moon,  and  then  by  “a  lanthorn  and 
candle  .  .  .  hung  out  on  a  pole  before  every  seventh  house,  each 

neighbor  paying  his  share  of  the  expense  under  penalty  of  a  fine  of  nine- 
pence.”  Wells  were  sunk  by  virtue  of  funds  assessed  on  the  districts  to 
which  they  were  to  minister.  Mayor  Delanoy,  in  1688,  sent  constables 
through  the  city’s  wards  to  find  out  the  persons  who  stood  in  need  of 
public  charity.  In  this  year  the  assessed  valuations  of  estates  in  New  York 
amounted  to  £78,231.  Three  years  later  the  ferry  between  Peck  Slip  and 
Brooklyn  was  leased  for  £147  per  annum,  and  the  Great  Dock,  extending 
along  the  East  River  from  Broad  to  Whitehall  Street,  was  leased  at  about 
£40  yearly.  In  1692  the  colony  raised  £6,000  to  help  the  British  fight  the 
French. 

In  1697,  irrespective  of  contributions  to  Great  Britain’s  war  fund, 
New  lTork’s  expenditures  were  as  follows :  For  the  poor,  £156 ;  for  the 


28 


THE  NEW  YORK  STOCK  EXCHANGE 


bridge,  £120 ;  for  the  slip,  £60 ;  for  the  scavenger,  £15.  This  made  a  total 
of  £351. 1 

Within  two  or  three  years  the  entire  cost  of  the  new  City  Hall,  some¬ 
thing  less  than  £4,000,  was  raised  from  this  prosperous  little  community 
by  direct  taxation.  In  1703  Mayor  French  wanted  £1,500  for  a  new 
battery  at  the  Narrows,  and  it  was  obtained  by  imposing  the  following 
taxes :  Provincial  councilmen,  40s.  each ;  assemblymen  and  lawyers,  20s. 
each ;  every  wearer  of  a  periwig,  5s.  6d. ;  every  bachelor  over  twenty-five 
years  old,  2s.  3d. ;  every  other  freeman  between  sixteen  and  sixty  years  of 
age,  9d. ;  masters  of  slaves,  Is.  for  each  slave  between  sixteen  and  sixty 
years  of  age ;  distillers,  3d.  for  each  gallon  produced. 

Teunis  de  Kay  opened  Nassau  Street,  ‘‘the  street  that  runs  by  the  pie- 
woman’s,  leading  to  the  City  Commons,”  in  June,  1696.  Four  years  later 
a  lot  at  the  east  corner  of  Wall  and  Broad  streets— where  the  Drexel 
Building  now  stands — sold  for  £163.  Several  handsome  dwellings  were 
erected  in  Wall  Street,  at  the  East  River  terminus  of  which  a  wharf  had 
been  constructed,  and  here  the  redoubtable  Captain  William  Kidd  was 
wont  to  take  on  supplies  for  his  craft.  He  was  reputed  to  enjoy  “protec¬ 
tion  ”  from  the  Governor,  at  a  good  round  price. 

In  these  days  lodging  cost  threepence  a  night,  a  full  meal  eightpence, 
and  a  gill  of  brandy  sixpence.  Before  the  face  of  the  new  City  Hall  the 
Whipping-post  cage>  pillory,  and  whipping-post  reminded  offenders  that  the 
and  comforts  of  civilization  had  been  carried  to  a  new  world, 

slave  market.  From  1709  to  1713  negro  and  Indian  slaves  were  exposed 
for  sale  to  a  prudent  generation  at  the  easterly  end  of  Wall  Street. 
These  unfortunates  were  treated  with  terrible  rigor ;  a  gathering  of  more 
than  four  of  them  constituted  a  mob,  and  was  dealt  with  on  that  theory. 

The  first  English  schoolhouse  on  Manhattan  Island  was  built  in  1702. 


Seventeen  years  later  the  First  Presbyterian  Church  (which  later  was 
burned  down,  then  rebuilt,  and  then  removed  piecemeal  to  Washington 
Street,  Jersey  City)  was  erected  in  Wall  Street,  west  of  the  City  Hall. 
This  church  and  the  sugar-house  (sugar-refinery)  were,  in  1728,  the  only 
buildings  on  the  north  side  of  the  thoroughfare  between  Broadway  and 
William  Street,  except  the  City  Hall.  McEvers’  mansion,  the  finest 
private  residence  in  Wall  Street,  stood  at  the  northeast  corner  of  William, 
and  in  1791  became  the  home  of  the  Bank  of  New  York,  whose  building 
occupies  the  site  to-day. 

Montgomerie’s  charter  was  granted  in  1730  and  was  followed  by  a 
period  of  satisfactory  commercial  growth,  which  necessitated, 
Early  municipal  however,  the  building  of  the  first  poorhouse.  The  old  city 
watch  was  increased  to  a  dozen  men.  A  watch  house  was 

1  Financial  New  York:  William  Ten  Eyck  Hardeubrook.  New  York.  1899. 


EARLY  DAYS  IN  MANHATTAN 


29 


built,  and  the  expense  of  this  primitive  police  department  grew  from  £50 
yearly  to  £448.  Fire  engines  were  not  known — they  did  not  come  in  till 
177 4.  The  city’s  revenue  in  1740  came  from  these  sources : 


Rent  of  ferry -house, . £319 

Docks  and  slips, .  73 

Licenses  to  liquor-dealers,  about, . 200 

Freedoms  granted,  about, .  75 

Leases  of  common  lands, .  14 

Rents  of  water-lots, .  75 


The  city’s  growing  sense  of  independence  kept  pace  with  its  growing 
wealth  and  influence,  paving  quietly  and  well  the  way  for  the  struggle 
that  was  to  cut  the  bonds  that  bound  the  thirteen  colonies  to  Great 
Britain.  This  spirit  of  freedom  showed  itself  in  its  strength 
as  early  as  1735,  when  an  editor  of  the  New  York  “Weekly  TLe Zenser tnal- 
Journal,”  a  Mr.  Zenger,  dared  to  criticise  the  local  government,  and  was 
thrown  into  jail.  He  was  kept  a  prisoner  for  nine  months,  and  then  tried 
in  the  City  Hall,  and  gloriously  acquitted  by  the  eloquence  of  his  advocate, 
the  distinguished  Andrew  Hamilton,  of  Philadelphia.  Great  enthusiasm 
was  displayed  by  the  public.  Hamilton  received  a  gold  snuff-box  from  the 
Mayor,  and  Zenger  got  nothing  but  his  freedom  save  the  satisfaction  of 
knowing  that  he  had  suffered  to  win  the  first  great  battle  in  the  colony  of 
New  York  for  the  liberty  of  the  press. 


II 


GENESIS  OF  THE  NEW  YORK  STOCK  MARKET 


HE  record  of  the  eighteenth  century  in  New  York  City  was  a 
record  of  steady  growth  and  commercial  progress  until  the 
hour  when  the  community  became  involved  in  the  conflagra¬ 
tion  that  burned  away  the  bonds  uniting  the  colonies  to 
Great  Britain.  In  this  test  by  fire  there  was,  of  course, 
the  ruin  of  much  that  deserved  to  escape  the  flames,  and 
the  effect  of  commercial  disorder  exerted  itself  throughout  the  Atlantic 
Seaboard  long  after  Cornwallis  had  tasted  the  humiliation  of  Yorktown. 

The  pre-Kevolutionary  period  displays  itself  in  colors  attrac- 
Uonary'period!"  tive  contrast.  Its  record  was  all  the  more  noteworthy 
by  virtue  of  the 
handicap  which  it  carried  —  a 
vicious  currency  system  which 
not  only  worked  iniquity  in  its 
own  time  but  bequeathed  to  a 
later  generation  the  effects  of  its 
debasement. 

Notwithstanding  this  drawback,  New  York  made  praiseworthy  strides. 
The  city’s  first  bonds  were  issued  in  1751  to  pay  for  a  corporation  pier. 

,  .  ,  Later  it  was  thought  no  harm  to  raise  funds  by  the  lottery 

The  city  8  0  J  J 

first  bonds,  system.  Wall  Street  was  then  notably  the  fashionable 

municipal  thoroughfare,  where  men  like  General  John  Lamb,  afterwards 
first  Collector  of  the  Port  under  the  United  States  Government, 
and  James  McEvers,  who  was  appointed  stamp  collector  in  1765  and 
refused  to  put  the  Stamp  Act  into  effect,  had  handsome  dwellings.  It 
was  also  the  business  centre  of  the  city,  and  probably  contributed  its 
full  quota  to  the  purchase  of  lottery  tickets  which  the  municipality 
delighted  to  sell.  Bedloe’s  Island  was  bought  with  lottery  profits.  In 


GENESIS  OF  THE  NEW  YORK  STOCK  MARKET 


31 


The  Stamp  Act. 


1746. 

MEAL  AND  SLAVE  .MARKET,  FOOT  OF  WALL  STREET. 


1756  the  colony  could  afford  to  enroll,  clothe,  and  arm  thirteen  hundred 
men  for  the  King’s  service.  Two  years  later  it  raised  £100,000  for 
municipal  purposes,  by  bills  of  credit.  In  1770  its  thriving  merchants 
incorporated  the  Chamber  of  Commerce. 

With  the  increase  in  the  resources  of  the  American  colonies,  the  friction 
between  their  people  and  the  British  Crown  increased.  In 
the  exciting  events  attending  the  repeal  and  passage  of  the 
Stamp  Act  New  York  had  her  share. 

In  1765  the  first  stamps  arrived  in  this  harbor,  and  the  Mayor — 
Governor  Colden  having  been  compelled  to  give  them  up— marched  with 
them  through  Wall  Street,  followed  by  a  great  crowd,  and  placed  them 
in  the  City  Hall.  Upon  the  repeal  of  the  Stamp  Act  the  residents  erected  a 
marble  statue  of  Pitt,  Earl  of 
Chatham,  at  Wall  and  William 
streets.  It  was  beheaded  in  the 
course  of  the  British  occupation 
of  the  city,  1776-83,  and  the 
Ro3^al  Historical  Society  has 
what  is  left  of  it. 

New  York  was  a  hotbed  of  factional  strife  at  the  outbreak  of  the 
Revolution,  but  the  “Rebels”  were  in  the  majority.  The  Rev.  Charles  Inglis, 
rector  of  Trinity  Church,  who  had  been  warned  not  to  pray  for  George  III, 
dared  to  do  so  in  the  face  of  a  hundred  and  fifty  armed  men, 
who  marched  into  the  church  with  drums  beating  and  fifes  a  stormy 

* — 1  scene  in 

playing.  The  clergyman  evidently  believed  his  monarch’s  Trinity  Church, 
spiritual  necessity  justified  the  risking  of  life  to  intercede 
for  him,  and  the  invaders  approved  his  courage,  if  not  his  views,  for 
they  marched  out  peaceably  enough  after  accepting  the  rector’s  blessing. 

There  is  no  need  even  to  outline  the  course  of  the  Revolutionary  W ar. 
It  cost  much  havoc  to  New  York,  the  British  gutting  the  City  Hall,  and, 
among  other  touches  of  vandalism,  scattering  the  library  and 
making  fuel  of  the  splendid  shade  trees  that  lined  Wall  Street  ^dependence"' * 
before  the  arrival  of  the  hostile  troops.  After  their  evacua¬ 
tion,  in  1783,  the  City  Hall  having  been  well  cleaned  and  renovated,  the 
State  Legislature  met  there.  In  December,  1784,  Congress  held  there  its 
first  session,  and  the  growing  metropolis  of  New  York  became  the  nation’s 
capital.  John  Jay  received  the  freedom  of  the  city  in  a  gold  box 
delivered  at  the  City  Hall,  and  it  was  in  this  building,  in  1789,  that 
Chancellor  Livingston  administered  to  George  Washington  his  oath  of 
office  as  first  President  of  the  United  States.  Three  years  later,  in  a 
modest  fashion,  the  business  men  of  this  city  laid  the  foundation  of  the 
New  York  Stock  Exchange. 


32 


THE  NEW  YORK  STOCK  EXCHANGE 


Luxury  and 
gaiety  in 
Wall  Street. 


CITY  HALL.  IN  WALL  STREET,  AS  ENLARGED  FOR  THE  CAPITOL. 


Distressed  though  the  country  was  by  the  ravages  of  a  struggle  that 
had  demanded  the  endurance  of  enormous  hardship  and  a  terrible  expendi¬ 
ture  of  blood  and  wealth  as  the  price  of  victory,  New  York 
and  Philadelphia  were  both  centres  of  much  luxury  in  the 
period  immediately  succeeding  the  war.  With  a  large  part  of 
the  public  impoverished,  the  capital  city  of  the  day  could  still 

display  a  dazzling  array 
of  fashion  and  a  notable 
conflux  of  those  who  had 
much  and  spent  freely. 
According  to  Brissot  de 
Warville,  a  noted  French 
visitor,  living  was  more 
expensive  in  New  York 
than  in  Paris.  The  pres¬ 
ence  of  many  strangers 
heightened  the  gaiety. 
Great  Britain  having  re¬ 
signed  the  privilege  of 
dictating  our  laws  consoled  herself  by  dictating  our  fashions,  while  streets 
which  had  resounded  to  the  rattle  of  rifle  and  drum  buzzed  by  daylight  with 
social  chatter  and  re-echoed  at  night  the  music  of  quadrille  and  minuet. 

Since  it  was  in  this  very  period  that  commerce  gave  birth  to  the  Stock 
Exchange,  its  conditions  are  worth  some  analysis.  The  luxury  and  frolic 
of  the-day  were  not  entirely  healthful.  To  a  certain  extent  they  reflected 
the  high  spirits  of  a  young  nation,  intoxicated  with  its  entrance  upon  life 
and  eager  to  develop  in  its  liberty  the  fashionable  features  which  could  be 
noticed  in  Old  World  countries,  and  were  considered  a  salient  part  of 
national,  dignity.  To  a  still  larger  extent  they  represented  money  which 
came  and  went  easily.  They  were  the  undesirable  corollary  of  the  blunders 
of  national  finance. 

No  lengthy  discussion  need  be  devoted  to  those  blunders  now.  They 
will  be  discovered  only  too  frequently  in  this  narrative.  Their  source  is 
traceable  to  the  year  1690,  when  the  Colony  of  Massachusetts, 
Effects  of  the  whose  people  have  never  been  offended  at  the  imputation 

i8sue.r  currency  of  possessing  superior  wisdom,  issued  bills  of  credit,  to  the 
amount  of  £40,000,  to  compensate  some  soldiers  who  had 
returned  from  a  Canadian  expedition  without  getting  their  expected  loot, 
and  were  clamoring  for  their  pay.  Two  years  later  these  bills  were  made 
legal  tender,  receivable  for  taxes  on  a  basis  slightly  inferior  to  that  of 
silver,  and  redeemable  in  silver  in  twelve  months.  Though  a  definite 
terminus  was  thereby  set  to  the  evil  this  measure  might  do,  its  example 


1 


. 


fej-r-  - 

Thrf.e  Dollars 

\‘T'HISBill  mtitUi  the 
B  y  A  »  i  *.  to  receive 
"*'|Thrce  Spanish  milled 
DoLLARSj)or./Ac  Value 
\t  hereof  in  Gold  or  Silnvr, 
nccordrvP  to  a  Re/olvtjon 

i ;J  CONGRESS.  tafjeA' 

)  \at  Philadelphia  Februa-1 
lh  17,  177  6^  , 

<xj  ir  frftsfami  t ■ 

M  mMmMM 


lNWo£c%m 

*7*11  IS  Bill  entitles  tht 
Rearer  to  receh'e  SE- 
V  K  N  Spanish  milled 
•DOLLARS,  or  tbeFaltie 
thereof  in  Gold  or  Silver, 
to  a  Be  Joint  ion 


\of  CONGRESS,  pajjed 
\at'  Ph.’addphia  Fcbru- 
rwi-  }V&-  ,7- 


fyfPafitd  %jl  uly  17" 

:  ,  ■  - 


*T7 /  £  Bearer  ts  entitled 
to  recti  ve  l'  H  R.  E  E 
Spanish  milled  DOI  - 
LARS,  or  an  equal  Sum 
in  Gold  or  Silver,  at 
tor  ding  to  a  Refolution 


torn  tug  10  a  i^cio.uuon  •, 

of  CONGRESS  of  tb<  2 


14/A  January,  1779. 

Three  Dollars, 


''TPHIS  Bill  entitles  the 
L  Re.irvr  tovvecelve 
Four  Spanifh  'mined  Dil- 
\int  or  the  Value  there¬ 
of  in  Gold  or  Silver,  ac¬ 
cording,  to  a  Rcfofrutionj 
<  f  (MKGJtBSS,  palTed  I 
it  Vhilu  i-'phia  FebMtiA 


FOUR  DO  1-LA  as. 


r  r  y ; 

■  Hiii  rlitifleft  tlif 


r  PHIS.Biii  entitles  tin 
-»-•  ,Bc/ircr  to  receive 
BIG  //T  Spani/h  mi- led 


f)  OJL  L  A  RSy  or  the 
Value  thereof  In  GoU 
1 or  Silver,-  According  to 
ia  Relbiution  of  CON- 
,G  KESSr  V&d  at  Pbi 
ladeipbiti  February  17. 


wyrio*' 


EmuTiAitoiizs: 


COLONIAL, “CONTINENTAL”AND  STATE  CURR  ENCV- I  775, 1  776, 1760 


GENESIS, OF  THE  NEW  YORK  STOCK  MARKET 


33 


“Not  worth  a 
Continental.” 


had  already  worked  havoc.  The  colonies  discovered  how  easy  it  was  to 
make  money,  and  determined  to  grow  rich  by  the  process.  The  first  paper 
currency  act  was  passed  by  the  New  York  House  of  Assembly  on  May  25, 
1709.  Credit  bills,  redeemable  at  no  set  date,  were  issued  with  prodigal 
freedom  in  the  various  colonies  as  the  infection  spread,  and  depreciation 
attained  the  speed  of  a  railway  express.  The  laborer’s  wages  and  the  price 
for  the  farmer’s  product  shrunk  wThile  they  held  the  bills  in  their  hands. 
The  Royalist  governors  endeavored  to  check,  by  the  veto,  the  mad  rush 
to  turn  out  legal  tenders,  and,  according  to  one  Massachusetts  historian, 
Felt,  the  ensuing  friction  did  much  to  pave  the  way  for  a  struggle  with 
Great  Britain. 

The  currency  evils  of  colonial  times  were  magnified  under  continental 
rule.  “Old  tenor”  was  succeeded  by  “new  tenor”  at  quick  intervals,  the 
only  essential  difference  between  the  “tenors”  being  in  degree 
of  depreciation.  “Not  worth  a  Continental”  became  a 
current  synonym  for  “useless.”  Dishonest  debtors  used  their 
influence  to  have  many  of  these  bills  passed,  delighting  to  discharge  their 
obligations  in  a  cheap  and  debased  currency,  and  careless  as  to  whom  it 
ruined.  Fortunes  were  made  by  those  who  contracted  to  buy  real  estate  or 
merchandise  at  certain  figures,  and  who,  by  reaping  the  benefit  of  a  fresh 
currency  issue  and  accelerated  depreciation  before  the  time  came  for  the 
execution  of  the  contracts,  were  able  to  pay  in  degraded  money.  Wealth 
gained  in  this  easy  fashion  and  the  sentiment  of  the  day — that  money 
could  only  be  properly  used  by  spending  it  before  it  had  a  chance  to 
deteriorate — combined  to  induce  the  prodigality  and  luxury  which  the 
Wall  Street  observer  might  notice  just  after  the  war. 

Congress  did  not  crush  this  many-headed  currency  monster  till  after 
frequent  vain  attempts.  Stringent  laws  were  enacted  to  punish  those  who 
discriminated  against  the  legal  tenders  in  their  sales,  and 
such  laws  were,  of  course,  no  sooner  made  than  broken.  Even 
Washington  at  one  time  bitterly  condemned  the  men  who  discriminated  in 
this  fashion,  though  he  later  came  to  see  that  the  fault  did  not  lie  with 
them.  In  1779  Congress  tried  to  do  altogether  without  money,  by  laying 
upon  the  several  colonies  requisitions  for  specific  supplies,  but  consequent 
abuses  and  blunders  forced  the  abandonment  of  this  policy.  Then  the 
Revolutionary  statesmen  determined  to  impress  what  they  needed  into  the 
country’s  service,  and  farmers  stored  their  produce  lest  they  should  lose 
their  horses  by  bringing  it  into  town.  The  disorders  of  the  time  make  too 
long  a  story  to  be  told  here.  One  currency  issue  after  another,  having 
passed  through  successive  stages  of  degradation,  was  extinguished  either 
by  redemption  at  a  pitifully  low  rate  or  by  utter  repudiation.  Of  the 
Revolutionary  and  post-Revolutionary  legal  tender  laws  Judge  Story  says: 


Financial  chaos. 


34 


THE  NEW  YORK  STOCK  EXCHANGE 


l££They  entailed  the  most  enormous  evils  on  the  country  and  intro¬ 
duced  a  system  of  fraud,  chicanery  and  profligacy  which  destroyed  all 
private  confidence  and  all  industry  and  enterprise.” 

Such  was  the  condition  of  the  country’s  money  at  the  time  when  the 
Stock  Exchange  arose.  In  1786,  besides  many  fine  residences — among 
them  one  occupied  by  Alexander  Hamilton — Wall  Street  contained  the 
places  of  business  of  fifty-four  merchants,  a  school-teacher,  a  cloakmaker, 
a  snuff  and  tobacco  manufacturer,  a  grocer,  a  bookseller,  a  milliner,  a 


OLD  BOYAL  EXCHANGE,  FOOT  OF  BBOAD  8TBEET.  1752. 


printer,  an  upholsterer,  two  tailors,  and  three  auctioneers.  It  also  boasted 
a  tavern,  a  porter-house,  an  intelligence  office,  and  a  fashionable  boarding 
house,  where  a  Mrs.  Daubigny  presided.  The  removal  of  the 
The  Federal  seat  of  Federal  Government  to  Philadelphia  cost  Wall  Street 
leaves  New  York.  muctl  oi  ms  gaiety,  and  commercial  and  financial  growth 
began  to  succeed  to  the  vagaries  of  fashion.  In  1790  New 
York  City  contained  31,131  persons.  The  following  year  witnessed  the 
consecration,  by  Bishop  Prevost,  of  the  rebuilt  Trinity  Church.  It  was 
demolished  in  1848  to  make  way  for  the  present  edifice,  whose  chimes  for 
more  than  half  a  century  have  softened  to  the  ear  at  intervals  the  feverish 
roar  of  the  financial  district. 

1  Stoby  on  the  Constitution,  II.  1871. 


GENESIS  OF  THE  NEW  YORK  STOCK  MARKET 


35 


First  national 
loan. 


In  1752  there  had  existed,  at  the  foot  of  Broad  Street,  the  Royal 
Exchange,  where  merchants  met  to  make  their  bargains.  This,  however, 
was  not  more  properly  the  precursor  of  the  Stock  Exchange  „ 

i  l  l*  T  -i  -i  •  Government 

than  was  the  market  for  meal  and  slaves.  It  was  the  desire  securities  create 
to  deal  in  the  Government  securities  (which  were  really  the  the  need  of  a 
debts  incurred  by  the  Continental  Congress  and  the  separate  ytock  Extbailge- 
colonies  or  States,  and  assumed  at  the  close  of  the  war  by  the 
nation)  that  brought  about  the  first  organization  of  stock  brokers 
in  this  city. 

On  December  23,  1776,  forty-nine  years  after  the  legalization  of 
tobacco  paper  currency  in  Virginia,  the  Continental  Congress  negotiated 
its  first  loan  with  the  Farmers  General  of  France.  Although 
the  loan  was  for  $10,000,000,  stock  to  the  amount  of 
only  $181,500  of  this  particular  issue  was  actually  sold.  It 
bore  five  per  cent,  interest,  was  redeemable  in  tobacco,  and  was  taken  at 
par.  After  the  meeting  of  Congress,  in  1789  and  1790,  in  the  New  York 
City  Hall,  then  called  Federal  Hall,  and  the  consequent  assumption  by  the 
nation  of  Continental  and  State  obligations,  the  outstanding  “ stock” 
of  the  United  States  amounted  to  about  $80,000,000.  Merchants  and 
auctioneers  received  orders  to  buy  or  sell  Government  stock,  and  soon 
there  arose  specialists  in  this  branch  of  industry  known  as  stock 
brokers. 

The  Diary,  or  Loudon’s  Register,  a  local  newspaper,  affords  the 
first  mention,  early  in  March,  1792,  of  anything  like  organization  among 
dealers  in  securities.  It  announced  that  the  Stock  Exchange 
office  was  opened  at  No.  22  Wall  Street,  where  A.  L.  Bleecker 
&  Sons,  J.  Pintard,  McEvers  &  Barclay,  Cortlandt  &  Ferrers, 
and  Jay  &  Sutton  would  hold  public  sales  of  stock  daily  at 
noon,  selling  in  rotation.  The  specialists,  or  stock  brokers, 
seemed  to  regard  this  as  an  effort  by  the  auctioneers  to  monopolize  the 
business.  On  March  23,  1792,  Loudon’s  Register  told  the  public  that 
the  brokers  had  given  the  auctioneers  a  Roland  for  their  Oliver.  The 


Earliest 
organization 
of  the  brokers, 
March,  1792. 


notice  ran: 

“A  meeting  was  held  at  Corre’s  Hotel  on  Wednesday  last,  March  21st, 
of  the  merchants  and  dealers  in  stocks,  when  they  came  to  the  resolution 
that  on  and  after  the  21st  of  April  next  they  will  not  attend  any  sale  of 
stocks  at  public  auction,  and  also  appointed  a  committee  to  provide  a 
proper  room  for  them  to  assemble  in,  and  to  report  such  regulations 
relative  to  the  mode  of  transacting  their  business  as  in  their  opinion  may 
be  proper.” 

The  outcome  of  this  meeting  was  the  first  agreement  of  the  dealers 
in  securities,  the  oldest  record  now  in  the  Stock  Exchange  a  notable  agreement 
archives.  The  agreement  ran  as  follows:  and  its  signatories. 


36 


THE  NEW  YORK  STOCK  EXCHANGE 


“We,  the  Subscribers,  Brokers  for  the  Purchase  and  Sale  of  Public 
Stock,  do  hereby  solemnly  promise  and  pledge  ourselves  to  each  other  that 
we  will  not  buy  or  sell  from  this  day,  for  any  person  whatsoever,  any  kind 
of  Public  Stock,  at  a  less  rate  than  one  quarter  per  cent.  Commission  on 
the  specie  value,  and  that  we  will  give  a  preference  to  each  other  in  our 
Negotiations.  In  Testimony  whereof  we  have  set  our  hands  this  17th  day 
of  May,  at  New  York,  1792.” 


Following  are  the 
signatories : 

names,  occupations,  and 

addresses  of  the 

Leonard  Bttecker, 

Broker,  .... 

16  Wall  Street. 

Hugh  Smith, 

Merchant,  .... 

Tontine  Coffee  House. 

Armstrong  &  Barnewall, 

Insurance  Brokers,  . 

58  Broad  Street. 

Samuel  March, 

Broker,  .... 

213  Queen  Street. 

Bernard  Hart, 

Broker,  .... 

55  Broad  Street. 

Alexander  Zuntz, 

Auctioneer  and  Broker, 

97  Broad  Street. 

Andrew  D.  Barclay,  . 

Merchant,  .... 

136  Pearl  Street. 

Sutton  &  Hardy, 

Stock  Brokers  and  Auctioneers, 

20  Wall  Street. 

Benjamin  Seixas, 

Merchant,  .... 

8  Hanover  Square. 

John  Henry, 

Broker,  .... 

13  Duke  Street. 

John  A.  Hardenbrook, 

Broker,  .... 

24  Nassau  Street. 

Samuel  Beebe, 

Broker,  .... 

21  Nassau  Street. 

Benjamin  Winthrop,  . 

Merchant,  .... 

2  Great  Dock  Street. 

John  Ferrers, 

Merchant,  .... 

205  Water  Street. 

Ephraim  Hart, 

Broker,  .... 

7 4  Broadway. 

Isaac  M.  Gomez, 

Broker,  .... 

32  Maiden  Lane. 

Gulian  McEvers, 

Merchant,  .... 

140  Greenwich  Street. 

Augustine  H.  Lawrence, 

Warden  of  the  Port, 

132  Water  Street. 

G.  N.  Bleecker, 

Merchant,  .... 

21  Broad  Street. 

John  Bush, 

Broker,  .... 

195-Water  Street. 

Peter  Anspach, 

Merchant,  .... 

3  Great  Dock  Street. 

Charles  McEvers,  Jr.. 

Merchant,  .... 

194  Water  Street. 

David  Reedy, 

Insurance  and  Stock  Broker, 

58  Wall  Street. 

Robinson  &  Ilartshorne, 

Merchants,  .... 

198  Queen  Street. 

For  some  time  the  brokers  who  were  unpretentiously  laying  the 
foundations  of  the  Stock  Exchange  had  neither  a  local  habitation  nor  an 
organization  name.  Like  the  curb  brokers  of  to-day,  they  settled  by  common 
consent  in  an  open-air  place  of  meeting.  A  buttonwood  tree  stood  then  on 
the  north  side  of  Wall  Street,  at  what  is  now  the  dividing  line  between 
Nos.  68  and  70,  a  veteran  survivor  of  the  days  of  the  English  occupation, 
when  its  compeers  fell  victims  to  the  invaders’  axe.  Beneath 
quo  tut  i  on  Hat  shade  the  stock  brokers  met  in  a  leisurely  fashion  to 

compare  their  orders  and  strike  their  bargains,  and  there  is 
good  evidence  that  their  business  was  not  so  rushing  as  to  prevent  their 
interlarding  bids  and  offers  with  gossip  about  the  politics  of  the  time. 


GENESIS  OF  THE  NEW  YORK  STOCK  MARKET 


37 


Here  is  a  quotation1  list  showing  the  prices  of  May  26,  1792,  twenty 
shillings  being  equivalent  to  par : 


Six  per  cents  .... 

. 22s.  Od. 

Three  per  cents  .... 

. 12s.  8d. 

Deferred . 

. 13s.  2d. 

Indents  . 

. 12s.  3d. 

Final  settlements 

. 18s.  6d. 

Half  shares  Bank  U.  S. 

. 50  per  cent,  premium. 

Shares,  Bank  of  North  America,  Philadelphia,  15  per  cent,  premium. 

Betting  on  the  results  of  domestic  and  foreign  political  controversies 
and  dealing  in  merchandise  accompanied  the  trading  in  securities.  In  1793 
the  Tontine  Coffee  House  was  completed,  at  the  northwest  corner  of  Wall 
and  William  streets,  and  the  brokers  deserted  the  buttonwood  tree  to  meet 
igfe  in  this  building,  the  New  York  Tontine  Coffee  House  Company 
having  been  chartered,  with  two  hundred  and  three  subscribers, 
at  $200  each,  for  the  purpose  of  a  Merchants’  Exchange.  As 
may  be  imagined,  dealers  in  other  commodities  shared  these 
quarters  with  the  dealers  in  securities,  and  at 
times  the  raucous  shouts  that  marked  a  fluctu¬ 
ating  price  were  succeeded  by  the  staid  voices  of 
members  of  commercial  bodies,  gathered 
for  periodical  meetings.  This  structure 
^  proved  an  efficient  incubator  for  that  pur- 


TONTINE  COFFEE  HOUSE,  WALL  STREET.  1797. 


suit  of  stock  speculation  which  was 
destined  to  become  one  of 
the  great  dramatic  feat¬ 
ures  of  the  metropolis. 
The  business  of  trading 
in  securities  started  as 
smoothly  as  in  Old  W orld 
countries,  and  grew  beyond 
the  limits  which  even  the 
imaginations  of  Old  World 
traders  had  set. 


a 


E  W  YORK’S  first  organization  of  brokers,  of  course,  did  not 
disprove  King  Solomon’s  dictum,  “that  there  is  nothing  new 

y—v  1  4- h  rv  V-r  rvnlr 

Evolution  of  the 


under  the  sun.”  For  the  true  antecedents  of  the  Stock 


Exchange  we  must  turn  to  that  shadowy  period  when  dealers  broker  from  the 
in  merchandise  began  to  transact  their  affairs  through  mlddleman- 
middlemen.  As  securities  came  to  take  their  place  among  the  instruments 

1  The  New  York  Stock  Exchange  :  F.  L.  Eamea.  1894. 


38 


THE  NEW  YORK  STOCK  EXCHANGE 


of  business  these  middlemen  came  to  deal  in  them.  Investment  buying 
and  speculation  were  interwoven  in  these  early  days  as  truly  as  in  our  own. 

The  records  of  the  rise  and  growth  of  each  stock  brokerage  organi¬ 
zation  in  Europe  form  no  part  of  the  scope  of  this  work.  It  is  not  the 
history  of  the  Berlin  or  Paris  Bourse,  or  of  the  market  now  housed  in 
Capel  Court  that  we  are  discussing.  But  the  telling  of  the  story  of  the 
New  York  Stock  Exchange  will  justify  a  cursory  glance  at  least  at  some 
of  the  institutions  and  conditions  which  may  be  called  its  natural 
prototypes.  These  conditions  include  the  first  applications  of  the  specu¬ 
lative  principle  to  the  articles  of  commerce.  Only  sporadic  references 
to  the  vocation  of  the  broker,  the  man  who  for  a  definite  commission 
transacts  the  business  of  a  client,  are  to  be  found  in  history.  He  seems, 
however,  to  have  plied  his  calling  since  the  beginning  of  trade  itself, 
and  to  have  associated  his  business  more  or  less  with  the  taking  of 
others’  risks  for  a  price.  He  is  still  taking  those  risks,  as  many  a 
man  whose  customers  fail  to  renew  exhausted  margins  can  bear  witness. 
The  speculative  instinct  of  humanity  naturally  enlarged  the  sphere  of  the 
mediaeval  predecessor  of  the  modern  broker.  His  methods,  of  course,  were 
peculiar  to  his  time.  Often  he  discharged  the  proper  functions  of  a 
merchant.  He  dispatched  his  goods  upon  the  backs  of  camels,  by  means 
of  some  Egyptian  caravan,  to  a  desired  market,  or  risked  the  perils  of 
piracy  in  committing  a  precious  cargo  to  trading  vessels,  and  then  spent 
his  leisure  time,  as  Salanio  expressed  it  to  the  Merchant  of  Venice: 

“  Plucking  the  grass,  to  know  where  sits  the  wind ; 

Peering  in  maps  for  ports,  and  piers,  and  roads.” 


In  either  case  he  bore  a  definite  relationship  to  the  broker  of  to-day.  The 
early  Phoenician  who  purchased  metal  at  a  venture  before  it  had  been 
mined  has  been  gathered  to  his  fathers.  His  spirit  has  descended  to  the 
dealer  in  puts  and  calls. 

The  most  striking  point  of  distinction  between  the  middleman  of  a 
few  centuries  ago  and  the  latter-day  broker  seems  to  be  that  speculation 
was  a  fundamental  part  of  the  business  of  the  former.  It  was  indeed  one 
of  his  instruments  of  gain.  In  the  Middle  Ages  the  term  “brocage”  was 
used  as  we  now  use  “brokerage.”  The  business  which  the 
term  indicated  is  traceable  in  England  back  to  the  time 
of  Edward  III.  The  British  Parliament  in  1376  enacted  as 
follows :  “No  stranger,  merchant,  nor  other  stranger,  shall  use  or  exercise 
the  occupation  of  ‘brocage’  between  merchant  and  merchant,  or  other 
persons,  nor  be  a  ‘broceur,’  within  the  City  of  London  or  its  suburbs.” 
Later  ‘broceur’  became  hardened  into  “brogger.”  Citizens  petitioned 
Parliament  in  1442  to  enforce  the  act  of  1376,  as  foreign  competition 


Brokerage  in 
England. 


GENESIS  OF  THE  NEW  YORK  STOCK  MARKET 


39 


had  begun  to  show  itself.  There  appears  to  have  been  a  very  limited  field 
for  brokers,  inasmuch  as  in  the  middle  of  the  sixteenth  century  there 
were  only  thirty  of  them  in  London.  These  were  licensed,  and  the  Lord 
Mayor  and  Aldermen  of  the  city  exercised  over  them  a  quasi-judicial 
control  which  they  were  not  able  to  shake  off  till  three  centuries  later. 

It  was  only  in  the  reign  of  William  of  Orange  that  the  merchandise 
broker  developed  into  the  dealer  in  securities.  Theretofore  the  Defenders 
of  the  Faith  in  Great  Britain  had  been  wont  to  borrow  as  the  spirit  moved 
them.  Their  wealthy  subjects’  response  to  the  royal  need  was  the  test  of 
the  latters’  loyalty  or  of  their  laudable  desire  to  keep  their  heads  upon 
their  shoulders.  But  the  world  had  made  progress  when  William  III  came 
to  the  throne,  and  he  thought  it  expedient  to  negotiate  his  loans  in  a 
considerate  fashion.  It  was  easier  to  confiscate  the  possessions  of 
posterity,  which  had  no  means  of  protesting,  than  to  follow  the  methods 
of  his  predecessors.  He  accordingly  established  the  national  debt,  France 
having  set  him  an  example.  In  1694,  the  Government  contracted  with  the 
Bank  of  England  the  first  of  its  regular  loans.  The  Bank  was  in  fact 
formed  for  that  specific  purpose.  Public  corporations  began  to  multiply. 
Their  securities  and  those  of  the  Government  were  the  new  commodities  in 
which  the  brokers  dealt.  Speculation  soon  came  to  thrive  with  what  it  fed 
upon,  and  Parliament  attempted  to  check  it  by  more  or  less  sumptuary 
legislation.  The  broker  was  obliged  to  carry  a  silver  token,  to  pay  forty 
shillings  for  a  license,  and  to  abstain  from  charging  more  than  ten  shillings 
per  cent,  for  brokerage.  The  licenses  were  limited  in  number  to  one 
hundred,  and  a  broker  who  transacted  his  business  without  one  was  liable 
to  a  fine  of  five  hundred  pounds.  “Time  bargains,”  which  resulted  on 
settlement  day  in  the  buyer’s  paying  the  difference  if  the  price  of  what  he 
had  purchased  had  declined,  or  pocketing  a  profit  if  it  had  risen,  but  which 
involved  no  out-and-out  acquisition  of  anything,  were  common  trans¬ 
actions.  In  the  eighteenth  century  all  classes  of  Englishmen  Eighteenth 

were  interested  in  speculation.  The  South  Sea  Company,  century 

whose  stock,  amounting  to  £33,500,000,  had  risen  from  speculation. 
£1  to  £1,200  a  share  in  value,  carried  thousands  down  with  it  to  ruin  in 
1720.  An  ingenious  swindler  of  the  day  tested  the  public  temper  by 
opening  an  office  and  inviting  the  public  to  subscribe  half  a  million  pounds 
“to  carry  on  an  undertaking  of  Great  Advantage,  but  nobody  to  know 
what  it  is.”  He  secured  £3,000  on  the  day  he  issued  his  prospectus  and 
ran  off  with  the  money  in  the  afternoon.  A  practical  joker  opened  an 
office  in  Change  Alley  and  asked  for  a  million  sterling  in  subscriptions  to  a 
new  concern  whose  objects  were  not  to  be  discussed  in  detail.  After 
receiving  a  large  sum  from  infatuated  speculators,  he  informed  them  by 
advertisement  that  he  would  return  the  money,  considerately  explaining 


40 


THE  NEW  YORK  STOCK  EXCHANGE 


London 
“bulls”  and 
“  bears  ” 


that  he  had  merely  experimented  to  determine  the  number  of  fools  that 
could  be  caught  that  way  in  twenty-four  hours. 

In  1773  the  organized  London  stock  brokers,  whose  places  of  meeting 
had  been  the  coffee  houses,  the  rotunda  of  the  Bank  of  England  and  the 
Royal  Exchange,  rented  a  structure  of  their  own  at  Threadneedle  Street 
and  Sweeting’s  Alley.  The  dealers  in  Government  securities  had  been 
meeting  in  the  rotunda  of  the  Bank  of  England,  however,  and 
continued  to  meet  there  till  1834.  A  writer  of  the  period, 
when  the  Threadneedle  Street  quarters  were  engaged,  had 
some  caustic  remarks  to  make  upon  the  subject  of  “bulls”  and  “bears,” 
who  had  borne  those  titles  for  about  two  centuries  and  a  half.  Speaking 
of  stock  jobbers  he  said :  “  I  know  not  what  specie  they  belong  to,  whether 
fish,  men,  birds  or  beasts.  A  stock  jobber  is  called  a  bull;  and  he  is  also 
called  a  bear.  The  bull  contracts  for  the  purchase  of  stock,  but  probably 
being  unable  to  pay  for  it  he  sells  it  again  at  the  chance  of  gain  or  loss 
before  the  settling  day  arrives.  The  bear  is  the  animal  that  contracts  to 
sell  stock;  but  he  sells,  perhaps,  more  than  he  is  possessed  of  (perhaps 
possesses  none  at  all),  and  is  yet  obliged  to  fulfil  his  contract  by  the  time 
agreed  on.  I  know  not  why  the  jobber  who  contracts  to  buy  is  styled  a 
bull,  except  that  he  appears,  when  a  loser,  as  surly  as  that  animal — the 
term  can  have  no  classic  origin,  as  these  beings  are,  in  general,  illiterate, 
and  have  never  heard  of  the  bull-offerings  to  Apollo.  From  the  structure 
and  aspect  of  the  bear,  as  described  by  the  French  academists,  these 
creatures  may  somewhat  resemble  the  unsuccessful  stock-jobber,  by  the 
heaviness  and  gloominess  of  his  appearance.” 

London  settlements  in  these  days  came  once  a  month,  or  less  fre¬ 
quently,  as  against  once  a  fortnight  now.  The  wits,  the  politicians,  and 
the  men  of  letters  played  bull  and  bear  by  turns.  Brokers  earned  the 
title  of  “lame  ducks”  by  defaulting  in  their  payments.  The  American 
Revolutionary  War  was  prolific  in  these  fowls.  It  produced  the  failure 
of  twenty-five  members  of  the  London  Stock  Exchange  in  1787,  along  with 
the  depreciation  of  the  British  Government’s  credit  by  forcing  the  mother 
country  to  negotiate  tremendous  loans  in  a  vain  effort  to  discipline  her 
unruly  daughter.  As  the  London  press  of  the  day  put  it,  “Twenty-five 
lame  ducks  waddled  out  of  the  Alley.”  It  is  reasonable  to  believe  that 
the  consequent  financial  disturbance  in  England  had  something  to  do  with 
the  conciliatory  spirit  Englishmen  eventually  developed  toward  the  young 
America. 

England  differs  not  at  all  from  other  European  countries  in  the  way 
in  which  merchant  middlemen  blossomed  into  securities  brokers.  The 
predecessor  of  the  Paris  Bourse  was  the  Change  de  Paris,  established  by 
the  Government  in  1304  at  the  Grand  Pont,  as  a  market  for  the  dealers 


GENESIS  OF  THE  NEW  YORK  STOCK  MARKET 


41 


The  Paris 
Bourse. 


who  had  been  accustomed  to  block  up  busy  streets  with  indiscriminate 
freedom — just  as  curbstone  sellers  of  houses  and  lots  were  accustomed  to 
choke  the  traffic  of  Liberty  Street,  between  Nassau  Street  and 
Broadway,  when  the  old  Real  Estate  Exchange  faced  on  that 
block.  The  Change  de  Paris  was  afterwards  removed  to  the 
Palais  de  Justice.  Stocks  and  bonds,  as  they  were  developed  in  the  course 
of  financial  and  commercial  progress,  replaced  general  merchandise,  and 
the  transformed  market  place  became  the  Bourse.  The  detailed  history  of 
the  speculation  which  it  nurtured  need  not  concern  us.  From  1720  to 
1724  the  Government  suppressed  it,  out  of  deference  to  public  opinion,  and 
then  it  wTas  revived  under  certain  legal  restrictions,  its  meeting  place  being 
the  Hotel  de  Nevers.  The  coming  of  the  French  Revolution  proved 
unfriendly.  While  an  outraged  peasantry  were  avenging  centuries  of 
oppression  by  destroying  the  throne  and  the  Bastile,  and  decapitating 
aristocrats  with  mad  indiscrimination,  the  political  atmosphere  was  not 
healthful  for  this  institution  of  finance.  It  was  closed  by  Governmental 
decree  in  1793,  but  reopened  in  about  a  year.  The  building  it  now  occupies 
was  completed  in  1826  at  a  cost  of  eight  million  francs. 

During  the  greater  part  of  its  existence  the  Paris  Bourse  has  been  at 
wTar  with  the  Coulisse,  an  organization  of  brokers  resembling  those  who 
now  form  the  curbstone  securities  market  in  Broad  Street.  The  members 
of  the  Coulisse  have  suffered  innumerable  penalties  of  fine  or  imprisonment 
through  this  enmity.  In  1859  the  Chambre  Syndicate,  the  ruling  body  of 
the  Bourse,  succeeded  in  having  the  Coulisse  suppressed  by  law  on  some 
appropriate  charge,  and  twenty-six  of  the  Coulissiers  were  each  sentenced 
to  pay  a  fine  of  10,500  francs.  In  this  year  the  sixty  Agents 

_____  Agents  de 

de  Change,  the  men  nominated  by  the  President  of  the  Re-  change, 
public,  who  hold  seats  on  the  Bourse,  each  received  the  legal 
right  to  engage  two  clerks  who  might  conduct  a  subordinate  brokerage 
business.  Under  the  guidance  of  the  Chambre  Syndicate  these  clerks 
formed  a  Coulisse  of  their  owm.  The  original  Coulisse  was  revived  about 
1881  in  an  open  fashion.  A  legal  battle  over  the  sale  of  certain  irregular 
issues  of  stock,  which  the  Agents  de  Change  sold  for  future  delivery  to  the 
Coulissiers,  took  place  and  resulted  in  a  decided  victory  for  the  latter. 
Since  that  time  there  lias  been  no  standing  feud  between  the  two  bodies. 

Under  the  existing  system  a  nominee  for  the  post  of  Agent  de  Change 
must  be  a  French  citizen,  at  least  twenty-five  years  old,  and  must  furnish 
certificates  as  to  his  character  and  capacity,  signed  by  the  heads  of  several 
financial  or  commercial  institutions  of  repute.  He  pays  250,000  francs  to 
the  treasury  of  the  Bourse  as  a  guarantee  of  good  conduct,  and  50,000 
francs  into  the  Caisse  Commone,  designed  to  assist  members  who  have 
failed.  A  seat  on  the  Bourse,  which  wras  worth  30,000  francs  a  century 


42 


THE  NEW  YORK  STOCK  EXCHANGE 


ago,  and  has  fluctuated  considerably  in  value  since,  can  be  sold  for  more 
than  two  million  francs  ($400,000)  to-day.  Twelve  persons  may  be 
partners  in  the  ownership  of  a  seat,  but  it  must  stand  in  the  name  of  one 
man.  The  others  are  personally  liable  for  the  obligations  he  contracts. 

The  calling  of  the  broker  has  been  plied  for  centuries  in  Italy  and  Spain 
as  wrell  as  in  France.  Its  important  character  in  adding  elasticity  to  the 
market  for  merchandise  has  been  as  noticeable  as  its  close  connection  with 
speculation.  By  facilitating  trade  the  broker  has  taken  his  place  in 
political  economy  as  one  who  discharges  a  function  supplementary  to 
production.  His  work  has  been  none  the  less  valuable  because  its  merit 
has  not  always  been  realized.  Like  the  man  who  transports  merchandise 
and  the  man  who  sells  it  at  retail,  he  fills  a  place  in  the  machinery  of 
distribution,  and  makes  good  his  claim  to  the  title  of  a  promoter  of  the 
progress  of  civilization.  His  methods  changed  as  the  commodities  he 
handled  changed, — from  silks,  and  spices,  and  hides,  to  Government  bonds 
and  railroad  securities.  Beneath  this  superficial  transformation  his  func¬ 
tions  remained  the  same. 


HE  founders  of  the  Stock  Exchange  in  this  city  were  fully  aware  of 
the  important  positions  which  followers  of  their  vocation  had 
attained  in  European  countries,  and  appear  to  have  gone  cheerfully 
to  work — in  the  face  of  a  period  of  post  bellum  commercial  distress  and 
of  an  incoherent  and  unsound  currency  system — to  equal  the  feats  of  their 
Old  W orld  predecessors.  They  have  bequeathed  to  the  readers 
stock  Exchange  ^is  generation  only  sparse  accounts  of  their  early  efforts, 
prior  to  1817.  We  know  at  least  that  they  kept  alive  the  business  of  dealing 

in  securities,  although  it  was  not  put  on  a  thoroughly  solid 
basis  till  the  adoption  of  the  Constitution,  in  1817.  The  Nation  and  the 
city  were  both  growing  sturdily  meanwhile.  Robert  Morris,  who  had  done 
the  Government  incalculable  service  throughout  the  strain  of  the  Revolu¬ 
tionary  war,  was  appointed  Superintendent  of  Finance  in  1781,  the  year 
Cornwallis  surrendered.  He  made  an  honest  and  reasonably  effective 
effort,  in  the  first  days  of  the  young  Republic,  to  bring  some  order  out  of 
the  financial  chaos  which  successive  issues  of  irredeemable  paper  currency 
had  produced. 

Morris  was  directed  to  fix  upon  a  table  of  rates  for  the  valuation  of 
foreign  coins  in  this  country.  His  study  of  the  monetary  situation  led  him 
Adoption  of  to  the  belief  that  a  single  silver  standard  should  be  adopted 
the  American  by  the  country,  and  that  the  Spanish  dollar  afforded  the  best 
dollar.  measure  of  value.  This  coin  passed  at  the  time  at  very 

different  ratings  in  the  different  colonies.  Morris  finally  submitted  to 


GENESIS  OF  THE  NEW  YORK  STOCK  MARKET 


43 


Congress  a  decimal  scheme,  based  on  the  dollar  as  a  unit.  It  was  opposed 
by  Jefferson  on  the  ground  that  a  currency  in  pounds,  shillings  and  pence 
was  simpler.  Jefferson  appears  to  have  been  finally  won  over,  for  his 
name  was  attached  to  the  system  adopted  by  Congress  in  July,  1787, 
which  was  in  a  large  measure  the  embodiment 
of  the  ideas  of  Morris.  The  American  dollar 
was  first  coined  in  1794,  and  contains  37114 
grains  of  pure  silver.  But  as  it  had  a  greater 
amount  of  alloy  than  the  present  dollar,  it 
weighed  416  grains,  as  against  41214  grains 
to-day. 

Congress  then  fell  into  the  mistake  of 
attempting  to  set  up  a  double  standard. 

Alexander  Hamilton,  after  due  investigation, 
reported  to  the  National  legislators  that  the 
ratio  of  gold  and  silver  was  about  fifteen  to 
one.  A  gold  dollar,  containing  one-fifteenth  as  much  of  the  yellow  metal 
as  there  was  pure  silver  in  the  silver  dollar,  was  accordingly  established. 
But  Hamilton  was  mistaken  in  his  ratio.  The  silver  dollar  was  not  so 
valuable  as  the  gold  one.  The  operation  of  Gresham’s  law,  of  course,  drove 
gold  out  of  circulation,  and  it  remained  out  of  circulation  till  1834,  when 
Congress  changed  the  unit  ratio  to  one  to  sixteen.  This  made  the  gold 
dollar  the  cheaper  one  and  drove  silver  out  of  circulation.  The  statesmen 
found,  to  their  chagrin,  that  the  ratio  of  the  precious  metals,  like  the  ratio 
of  wheat  and  oats,  could  not  be  controlled  by  statute. 

The  mint,  established  in  Philadelphia  in  1794,  coined  dollars  bearing 
representations  of  the  pillars  of  Hercules.  They  won  the  sobriquet  of 
“ pillar”  dollars.  Already  the  banking  system  of  the  country  had  been  set 
upon  its  feet  and  political  quidnuncs  had  started  the  first  breath  of  that 
controversy  which  centres  about  the  banks  and  which  has  not  failed  to 
show  itself  at  frequent  intervals. 


FIRST  UNITED  STATES  DOLLAR. 


Ill 


THE  PIONEER  BANKS  OF  THE  NATION 


ITH  the  humiliation  of  Lord  Cornwallis  and  the  final 
severing  of  the  cord  that  had  bound  the  Colonies  to 
England,  the  young  Kepublic  began  to  lay  the  founda¬ 
tions  of  commercial  progress.  It  established,  though  in 
a  halting  and  uncertain  fashion,  a  banking  system,  the 
advisability  of  which  soon  became  a  subject  of  political 
contention.  The  controversy  attained  a  crisis  in  Jackson’s  destruction 
of  the  second  Bank  of  the  United  States ;  but  even  in  the  closing  years 
Early  banks  °f  the  eighteenth  century,  and  the  early  years  of  the  nine- 

a  subject  of  teenth,  it  had  become  warm.  Yet  the  country  needed  the 

controversy.  banks,  and  they  steadily  gained  position  despite  the  con¬ 
troversial  excitement.  Their  development,  it  is  hardly  necessary  to  say, 
sustained  a  close  relation  to  the  progress  of  the  New  York  Stock  Exchange. 

In  some  measure  the  violent  opposition  to  banks,  cherished  even  by 
such  men  as  Jefferson,  was  a  result  of  the  natural  antipathy  of  a  young 
democracy  to  a  class  of  institutions  which  had  become  associated  in  the 
public  mind  with  aristocratic  oppression  and  with  a  subservient  desire 
to  supply  the  needs  of  royal  extravagance.  To  a  certain  degree  this 
signified  merely  a  vague  dislike  of  the  “money  power,”  joined  with  that 
inability  to  discriminate  between  the  right  and  the  wrong  uses  of  wealth, 
which  is  not  unknown  to  our  own  time.  In  a  larger  degree  it  arose  from  the 
well-founded  belief  that  many  of  the  banks  were  conducting  their  business 
on  unsafe  lines  and  were  using  their  power  in  an  unjust  way.  The  banks 
were  painfully  in  need  of  regulation,  and  even  of  repression.  It  was  easy 
for  those  whose’  indignation  flamed  at  their  abuses  to  believe  that  they 
should  be  altogether  suppressed. 

Jefferson,  who  was  opposed  to  Hamilton  on  the  question  of  the  banks, 
held  them  to  be  “monarchical  inventions,”  of  ruinous  tendencies.  He  did 


THE  PIONEER  BANKS  OF  THE  NATION 


45 


theory  in 
opposition. 


Hamilton  and 
Burr. 


not  hesitate  to  brand  the  “bank  mania”  as  a  threat  to  Republican 
institutions.  His  position  furnishes  good  excuse  for  the  attitude  of  lesser 
minds  in  his  day;  men  came  to  justify  the  view  he  first 
expressed  (even  after  he  had  somewhat  modified  his  opinion)  Jefferson’s 
by  reason  of  the  evils  that  eventually  flourished  beneath  the 
cloak  of  legitimate  financial  enterprise.  The  early  years  of 
the  last  century  justified  Jefferson’s  fears  in  a  great  measure,  and  if  he,  in 
the  face  of  the  extravagant  tendencies  of  the  banks  of  his  day,  could  not 
foresee  the  fashion  in  which  their  successors  would  be  linked  with  the 
extension  of  American  industry  and  commerce,  he  need  not  be  condemned 
as  short-sighted.  What  he  was  unable  to  predict,  there  are  many  to-day 
who  are  unable  even  to  see,  and  some  of  them  profess  to  be  our  intellectual 
leaders. 

So  far  as  the  early  financial  history  of  New  York  City  is  concerned,  it  is 
a  curious  fact  that  it  wras  illumined  by  the  most  striking  political  rivalry 
of  the  Republic’s  infancy,  that  of  Alexander  Hamilton  and 
Aaron  Burr.  Their  conflict  over  the  right  to  carry  on  the 
business  of  banking  in  this  city  assumed  a  position  of  much 
public  prominence  and  strengthened  a  growing  enmity.  It  may  be  readily 
understood  that  this  controversy  paved  the  way  to  their  meeting  on 
a  very  different  field.  The  quarrel  that  developed  the  formation  of  the 
Manhattan  Company  pointed  the  finger  of  prediction  to  the  duel  at 
Weehawken  and  the  nation’s  irreparable  loss. 

The  Bank  of  New  York  was  to  all  intents  the  second  institution  of  its 
kind  in  the  United  States.  The  Bank  of  North  America,  at  Philadelphia, 
which  is  accounted  the  pioneer  of  American  financial  associations,  was  not 
incorporated  till  1781,  a  year  after  the  Bank  of  Pennsylvania  issued  its 
first  notes.  But  the  Bank  of  North  America  (which  had  a  nominal  capital 
of  $400,000,  and  actual  cash  to  the  amount  of  $40,000)  succeeded  to  the 
business  of  the  latter  institution,  and  they  practically  figure  as  one  in  the 
history  of  the  time.  Congress  evidently  thought  that  the  Bank  of  North 
America  needed  a  helping  hand,  for  it  took  upon  itself  to  request  the  States 
to  prevent,  by  law,  the  establishment  of  any  rival  to  it.  The  assembled 
statesmen  exhibited  for  this  financial  infant  all  the  paternal  care  that  it 
later  became  the  fashion  to  display  toward  nascent  industries. 

But  they  could  not  protect  it  from  competition.  The  Bank  of  New 
York,  for  which  the  articles  of  association  were  drawn  by  Alexander 
Hamilton,  was  established  in  1784,  the  year  wherein  Robert  _  .  . 
Morns  ended  his  brief  but  magnificent  period  of  service  as  York  established 
the  national  Superintendent  of  Finance.  It  did  not  get  a  ln  Wall  street, 
State  charter,  however,  till  seven  years  after.  Its  nominal  1 
capital  was  $900,000.  For  a  time  it  occupied  a  building  in  Pearl  Street, 


46 


THE  NEW  YORK  STOCK  EXCHANGE 


but  in  1796  it  bought  the  property  at  the  northeast  corner  of  Wall  and 
William  streets,  which  is  the  site  of  its  present  building. 

The  country  was  entering,  at  the  time  New  York’s  first  bank  threw  open 
its  doors,  upon  a  period  of  construction.  This  was  also  a  period  of  recu- 
Vigorous  peration.  The  young  nation  had  no  sooner  outlived  the 

national  afflictions  that  attended  the  war  of  the  Revolution  than  it 

recuperation.  proceeded  to  display  a  vigor  unknown  in  the  days  of  British 
rule.  It  had  established  itself  in  the  eyes  of  civilization,  a  new  democracy, 
upon  a  soil  which  Nature  had  endowed  with  her  choicest  wealth,  breathing 


WALL  STREET.  1800. 

Bank  of  New  York.  City  Bank.  United  States  Bank. 


an  air  that  attracted  the  oppressed  in  European  countries,  as  the  free 
atmosphere  of  his  native  mountains  inspired  the  Prisoner  of  Chillon  with 
longing.  The  standard  to  which  Washington  made  reference  had  been 
lifted,  and  there  were  honest  men  in  abundance  who  repaired  to  it.  In  time 
the  goodly  earth  and  air  of  the  United  States  became  peopled  with  the 
victims  of  European  injustice  or  class  favoritism,  with  those  who  found  the 
Old  World  soil  insufficiently  fertile  or  the  Old  World  yoke  heavy  to  bear, 
and  with  the  choice  spirits  who  fancied  a  new  country  because  it  promised 
adventure.  It  is  the  fashion  to-day  to  shake  the  head  over  the  evils  of 
The  flow  of  immigration.  We  permit  ourselves  to  forget  the  time  when 
immigration  the  influx  of  the  children  of  other  countries  built  up  our  own 
begmy‘  land.  Beneath  the  influence  of  new  ideas,  unhedged  oppor¬ 

tunities  and  free  institutions,  these  new-comers  expanded  and  grew.  They 
carried  with  them  no  infection  which  this  atmosphere  could  not  purge. 


THE  PIONEER  BANKS  OF  THE  NATION  47 


They  brought  hither  the  simple  plastic  stuff  of  their  human  nature  and  the 
young  Republic  kneaded  it  into  a  loyal  and  sturdy  citizenship.1 

American  growth  and  progress  were  not  the  mere  vagaries  of  fortune. 
They  were  the  legitimate  products  of  two  factors — the  country’s  natural 
resources  and  the  work  of  the  founders  of  the  nation — who  ,,  . 

Morris  and 

embodied  in  its  Constitution  the  principles  of  religious  and  Hamilton 
political  freedom,  and  who  steadied  its  tottering  credit.  Two  restore  the 
men  deserve  the  glory  of  the  latter  achievement — Robert  natlon  8  credlt- 
Morris  and  Alexander  Hamilton.  In  the  light  of  history  there  is  no  need 
to  eulogize  these  consummate  masters  of  finance.  When  a  man  has  earned 
the  gratitude  of  his  countrymen  by  placing  his  own  credit  at  the  nation’s 
service,  in  her  blackest  hour,  as  did  Morris,  he  requires  no  panegyric.  After 
Webster  has  garlanded  the  memory  of  a  financier  by  declaring  that  he 
“touched  the  dead  corpse  of  public  credit  and  it  sprung  upon  its  feet,” 
as  he  said  of  Hamilton,  ordinary  praise  dwindles  into  triviality.  What 
may  be  pointed  out  is  simply  the  record  of  those  reforms  which  proved 
fundamental  to  national  prosperity  and  which  incidentally  produced 
and  nurtured  the  Stock  Exchange. 

Some  reference  already  has  been  made  to  the  vicious  nature  of  the 
currency  system  inherited  by  the  Continental  Congress  from  colonial 
misrule,  and  still  further  debased  in  the  course  of  the  War  of 
Independence.  Morris  was  not  able  to  overcome,  in  the  three 
years  of  his  administration,  the  evils  which  had  been  flourishing  for  a 
century.  But  he  did  succeed  in  conveying  to  the  minds  of  his  contempo¬ 
raries  a  glimmering  of  the  idea,  that  a  nation,  like  an  individual,  must  pay 
its  debts  if  it  would  succeed.  The  public  temper  against  which  he  had  to 


Robert  Morris. 


1  Immigration  in  the  years  immediately  succeeding  the  Nation’s  birth,  of  course,  did  not  attain  to 
anything  like  its  present  importance;  but  it  was  in  these  years  that  the  establishment  of  our  Government 
and  credit  upon  a  sound  basis  was  effected,  and  the  work  was  of  extreme  importance 
in  contributing  to  the  country’s  prosperity  and  thus  attracting  the  eyes  of  foreign  Tldal  reei?rc[a  of 

peoples.  Mr.  Young,  a  former  chief  of  the  United  States  Bureau  of  Statistics,  estimated  ‘mmieration, 

that  the  immigration  from  1776  up  to  and  including  1819— the  year  when  the 
steamship  Savannah  first  proved  the  commercial  possibilities  of  steam  navigation  by 
her  trip  from  this  country  to  Russia,  via  England  — amounted  to  250,000  souls,  of  whom  25,000  came 
between  1776  and  1790.  In  1820,  the  year  when  the  first  official  record  was  kept,  8,385  alien  passengers 
reached  our  shores.  The  number  of  immigrants  grew  in  unsteady  fashion.  In  1838  the  total  for  the  year 
showed  a  sharp  decrease  of  fifty  per  centum  from  that  of  1837,  the  panic  year.  In  precisely  the  same  way, 
the  panic  of  1857  induced  a  falling  off  from  251,306  persons  in  that  year  to  123,126  in  1858,  and  121,282 
in  1859.  Italy  sent  just  two  emigrants  to  America  in  the  period  between  October  1, 1831,  and  December 
31, 1832.  But  in  1833,  the  year  marked  by  Mazzini’s  circular,  addressed  to  a  Paris  journalist,  asking  the 
co-operation  of  republican  leaders  in  foreign  countries,  and  by  the  discovery  in  Piedmont,  of  the  revolu¬ 
tionary  schemes  associated  with  his  name — the  Italian  immigration  to  this  country  was  that  of  1,693 
persons.  Many  of  these,  doubtless,  were  political  refugees.  In  1840  the  first  regular  ocean  steamship  line, 
the  Cunard,  was  established.  The  year  of  the  gold  excitement,  1849,  saw  immigration  break  all  previous 
records,  but  it  scored  a  still  higher  record  in  1850.  In  the  years  immediately  succeeding  the  Irish  potato 
famine  of  1846  (which  incidentally  capped  the  climax  of  Cobden’s  agitation  and  induced  Peel  to  secure  the 
repeal  of  the  Com  Laws),  the  Irish  immigration  increased  enormously.  At  the  same  period  Germany  was 
sending  us  legions  of  her  people,  their  number  amounting,  in  1854,  to  206.054,  out  of  a  total  immigration 
to  this  country  of  427,833  persons  in  that  year.  Frederick  Kapp,  in  his  work  on  “Immigration,  ’  lays 
this  movement  largely  to  the  effect  of  the  coup  d’etat  of  Louis  Napoleon,  which  “closed  for  all  Europe  the 
revolutionary  era  opened  in  1848.”  Kindred  causes  were  effective  in  varying  the  tide  of  our  immigration 
from  time  to  time. 


48 


THE  NEW  YORK  STOCK  EXCHANGE 


excesses  brought 
to  an  end 


combat  was  illustrated  strikingly  by  the  sagacious  utterance  of  a  certain 
delegate  to  Congress  in  the  course  of  a  debate  on  the  financial  problem  a 
few  years  previous. 

“ Do  you  think,  gentlemen,”  said  he,  “that  I  will  consent  to  load  my 
constituents  with  taxes,  when  we  can  send  to  our  printer  and  get  a 
wagon-load  of  money,  one  quire  of  which  will  pay  for  the  whole?  ” 1 

This  sentiment  has  inspired  some  mirth  in  our  day  and  generation. 
But  antitypes  of  its  author  are  not  lacking  in  the  twentieth  century, 
and  have  no  better  excuse  than  his  for  their  style  of  logic. 

When  views  of  this  character  were  widely  held,  it  is  remarkable  that 
Morris  could  accomplish  so  much  in  preventing  fresh  issues  of  irredeemable 
currency  and  procuring  the  legitimate  taxation  that  was  to 
The  legal-tender  replace  them.  Even  such  an  acute  reasoner  as  Thomas  Paine 
was  deluded  into  regarding  the  effect  of  the  paper  money  of 
the  time  as  that  of  a  war  tax,  as  if  it  were  the  design  of  a  war 
tax  to  enrich  one  man  by  mining  another,  and  to  defraud  the  laborer  of 
his  wages  and  the  widow  of  half  her  revenue.2  Such  an  error  was  one  of 
confused  thought.  To  the  tangled  mazes  of  the  monetary 
andtaxationCy  problem,  Morris,  as  far  as  Congress  would  let  him,  applied 
the  simple  principles  of  integrity.  “I  have  no  system  of 
finance”  said  he,  “except  that  which  results  from  the  plain,  self-evident 
dictates  of  moral  honesty.” 

By  the  issue  of  his  personal  notes,  to  the  value  of  about  $1,400,000, 
he  succeeded  in  carrying  the  nation  through  the  war.  He  induced  Congress 
to  substitute  taxation  for  the  cherished  practice  of  issuing  irredeemable 
legal  tenders  that  were  destined  to  be  redeemed  at  such  ratios  as  forty  or 
one  hundred  to  one,  save  in  the  countless  cases  where  these  ill-starred 
notes  ended  their  criminal  careers  in  some  New  England  garret  or  some 
corner  of  an  old  hair  trunk  in  a  Southern  cottage.  He  husbanded  the 
funds  at  his  disposal  by  rigid  economy,  and  resisted  the  temptation  to 
pay  interest  on  Government  “stock”  by  loan  certificates,  no  matter  how 


1  The  Financial  History  of  the  United  States,  from  1789  to  1860:  Albert  S.  Bolles.  Boston.  1883. 


2  Benjamin  Franklin  also  shared  the  view  that  the  legal  tenders  acted  as  a  war  tax,  and  some  modern 
writers  give  it  a  mild  endorsement.  It  may  be  regarded  as  one  of  those  half  truths  that  Tennyson 
declared  to  be  ever  the  blackest  of  lies.  These  irredeemable  notes  did  resemble  a  tax,  in  that  they  effected 
the  support  of  the  Government  and  provided  for  the  cost  of  the  war  out  of  the  pockets  of  the  people,  but 
instead  of  the  orderly  and  systematic  drain,  characteristic  of  a  genuine  tax,  the  burden  of  which  is 
distributed  at  least  with  some  semblance  of  fairness,  and  the  results  of  which  business  men  can  calculate 
in  advance,  the  paper  currency  established  a  system  by  which  the  debtor  cheated  the  creditor  and  one 
man  founded  his  fortune  upon  another  man’s  losses.  The  defenders  of  the  policy  of  the  Continental 
Congress  insist  that  the  people  would  not  have  stood  a  direct  tax.  The  experiment  was  practically  untried 
until  Morris  came  into  office,  and  he  made  it  a  success.  The  issue  of  legal  tenders,  as  enumerated  by  Bolles, 
from  1775  to  1779,  inclusive,  make  an  aggregate  of  $236,552,408.  Other  sums  were  raised  by  foreign 
loans,  and  by  loans  negotiated  through  offices  established  for  the  purpose  in  this  country.  On  March  18, 
1780,  Congress  passed  a  measure  for  the  redeeming  of  the  outstanding  legal  tenders  in  fresh  notes,  at  the 
rate  of  forty  dollars  in  the  old  currency  to  one  in  the  new.  The  fresh  notes,  the  number  of  which  was 
larger  than  this  funding  process  required,  were  to  be  redeemed  at  par  in  specie  in  1786,  but  they  were  not 
taken  up  till  August,  1790,  and  then  at  the  rate  of  one  hundred  to  one. 


THE  PIONEER  BANKS  OF  THE  NATION 


49 


dark  appeared  the  outlook.  In  this  latter  connection  Morris  gave  speech 
to  one  of  the  loftiest  thoughts  a  national  crisis  ever  inspired  in  any 
American  statesman.  Discussing  his  intention  to  abolish  the  practice  of 
paying  interest  with  paper  promises  to  pay,  he  said  : 

“It  is  high  time  to  relieve  ourselves  from  the  ignominy  we  have 
already  sustained  and  to  resume  and  restore  our  national  credit.  This 
can  only  be  done  by  solid  revenue.  Disdaining,  therefore,  those  little  timid 
artifices  which,  while  they  postpone  the  moment  of  difficulty,  only  increase 
the  danger  and  confirm  the  ruin,  I  prefer  the  open  declaration  to  all  of 
what  is  to  be  expected,  and  whence  it  is  to  be  drawn.  To  the  public 
creditors,  therefore,  I  say  that  until  the  States  provide  revenues  for 
liquidating  the  principal  and  interest  of  the  public  debt  they  cannot  be 
paid ;  and  to  the  States  I  say  that  we  are  bound  by  every  principle  held 
sacred  among  men  to  make  that  provision.” 1 

The  taxation  of  the  time  was  apportioned  among  the  States  in 
accordance  with  their  respective  populations,  and  New  York  paid  a  small 
share.  This  method,  though  it  worked  injustice,  was  probably  the  best 
obtainable  in  view  of  the  inadequacy  of  available  data  as  to  the  compara¬ 
tive  wealth  of  the  States,  and  marked  an  enormous  advance  on  the  issues 
of  irredeemable  notes.  When  Morris  resigned  office,  in  1784,  the  country 
was  nearly  cured  of  the  legal-tender  mania.  It  had  vanished,  not  to  return 
till  the  advent  of  the  Civil  War.  He  retired  with  the  gratitude  of  all 
right-minded  men,  and  amid  the  attacks  of  disgruntled 
political  opponents.  It  is  a  biting  commentary  on  the  “^Paut^^8,fre 
practical  force  of  his  countrymen’s  appreciation  that,  having 
lost  his  wealth  in  his  old  age,  he  tasted  the  humiliation  of  a  debtor’s  prison 
before  obtaining  the  repose  of  the  grave. 

Hamilton’s  great  work  was  begun  in  1789,  when  the  Department  of 
the  Treasury  was  formed  after  an  interregnum,  in  which  a  Treasury 
Board  did  little  or  nothing,  and  Washington  selected  him 

as  its  first  Secretary. 

He  had  already  done 
brilliant  service  in 
securing  the  adoption  of  the 
^  Federal  Constitution.  The  steady 
application  for  a  considerable 
period  of  a  mind  at  once  analytic 
and  creative  to  the  problems  of 
finance  and  of  the  country’s  need, 
bore  golden  fruit  in  his  new  sphere 
federal  hall  and  part  of  broad  STREET.  1796.  Gf  activity.  Hamilton  has  been 
justly  accused  of  a  lack  of  sympathy  with  democratic  institutions,  but  he 

1  The  Financial  History  of  the  United  States,  from  1774  to  1789 :  Albert  S.  JBolles.  New  York. 
1879. 


Hamilton’s 
financial 
genius  and 
achievements. 


50 


THE  NEW  YORK  STOCK  EXCHANGE 


was  an  invaluable  public  servant,  despite  this  defect.  His  intellect  was  a 
divining  rod  for  the  discovery  of  the  treasures  of  administrative  wisdom. 
The  fallacies  that  had  led  to  the  heedless  and  slipshod  contracting  of  the 
public  debt  did  not  deceive  him  for  an  instant.  He  laid  down  for  his 
countrymen’s  use  the  principles  of  the  sinking  fund,  pointing  out  that  the 
ultimate  means  of  redeeming  a  Government  obligation  should  always  be 
provided  for  in  the  measure  that  created  it.  In  the  face  of  bitter  opposition 
he  advocated  the  funding  of  the  public  debt,  and  succeeded  in  carrying 
through  his  scheme. 


This  latter  achievement  merits  special  attention,  not  only  because  it 
was  Hamilton’s  greatest,  but  because  it  resulted  in  the  placing  on  the 
market  of  the  Government  securities,  which  were  the  first 
funded  at°  ^vestments  traded  in  by  New  York  brokers.  It  laid  upon 
the  shoulders  of  the  Federal  Government  the  debts  of  the 
separate  States  and  those  assumed  by  the  Continental  Congress.  These 
obligations  were  taken  up  at  par  in  new  bonds  or  “stock.”  Jefferson, 
whose  work  in  furthering  democratic  principles  was  considerably  offset  by 
his  constant  opposition  to  sound  financial  measures,  fought 
the  proposal1*8  ProPosal  to  redeem  these  debts  at  their  face  value.  He 
shared  the  view  with  which  Washington  appears  to  have  been 
tinctured — that  it  was  not  incumbent  upon  the  Government  to  accept  its 
obligations  at  rates  higher  than  had  been  paid  for  them  by  the  persons 
who  would  present  them  for  redemption.  In  connection  with  this  it  must 
be  remembered  that  the  “stock”  of  the  States  and  the  Continental 
Congress  had  passed  through  many  hands  in  the  course  of  its  depreciation, 
and  its  holders  were  by  no  means  those  who  had  taken  it  at  par  when  first 
issued.  But  Hamilton  saw  that  the  one  way  in  which  the  Government 
could  permanently  establish  its  credit  among  the  nations  was  by  rigidly 
keeping  its  faith.  The  national  honor  was  at  stake.  It  depended  upon 
the  payment  in  full  of  the  country’s  debts,  irrespective  of  the  market  value 
of  the  paper  or  the  profits  that  might  be  made  by  speculators  in  the  course 
of  the  reform. 

Jefferson  has  bequeathed  to  us  a  scathing  description  of  the  “base 
scramble”  that  followed  the  passing  of  the  funding  measure.  The  wily 
hastened  to  the  highways  and  byways  and  bought  up,  at  remarkably  low 
prices,  the  Government  “stock”  held  by  ignorant  men  who  did  not  dream 
that  it  could  be  redeemed  at  par.  It  was  natural  enough  that  such  a  trick 
should  inspire  Thomas  Jefferson  with  disgust.  No  honest  man  could  help 
regretting  that  the  unfortunate  holders  of  the  securities  were  made  the 
victims  of  imposition.  But  this  piece  of  chicanery  was  a  necessary  accom¬ 
paniment  of  a  great  piece  of  reform.  Naturally,  those  who  found  out  that 
they  were  cheated,  those  who  hated  to  see  them  cheated,  and  those  who 


THE  PIONEER  BANKS  OF  THE  NATION 


51 


reckoned  Hamilton  a  political  foe,  let  their  protests  be  heard.  The  Secre¬ 
tary  of  the  Treasury  felt  it  necessary  to  write  a  defence  of  his  position,  and 
he  showed  that  the  criticisms  hurt.  “  It’s  a  curious  phenomenon  in  political 
history,”  he  declared,  “that  a  measure  which  has  elevated  the  credit  of  the 
country  from  a  state  of  absolute  prostration  to  a  state  of  exalted  pre¬ 
eminence  should  bring  upon  the  authors  of  it  obloquy  and  reproach.” 

The  year  1790  saw  the  taking  of  a  step  that  the  Secretary  must  have 
detested,  but  which  was  the  logical  outcome  of  the  paper-money  debauch  in 
which  the  country  had  been  steeped.  Congress,  in  August, 
passed  a  measure  for  the  funding  of  the  outstanding  legal  of  179q 
tenders  in  six  per  cent,  bonds,  at  the  rate  of  one  hundred 
dollars  in  bills  for  one  in  specie.  Holders  of  notes  to  the  0ne  hundred 
amount  of  about  $7,000,000  took  advantage  of  this  pro¬ 
vision.  Some  odd  ideas  of  the  best  methods  of  raising  money  by  the 
Government  were  entertained  in  these  days.  One  writer  advocated  the 
avoiding  of  all  other  taxes  by  imposing  fines  for  drunkenness,  profanity, 
and  conjugal  infidelity.  He  advised  a  tax  of  only  sixpence  on  inebriety,  as 
a  heavier  penalty  might  discourage  trade. 

The  stock  brokers  who  organized  in  1792  conducted  their  business 
under  fair  conditions.  A  reformed  currency  system  had  been  launched,  the 
demand  for  Government  securities  was  reasonably  brisk,  and  a  thriving 
bank  stood  ready  to  extend  them  accommodation.  The  country  was 
beginning  its  period  of  recuperation  and  of  organic  development,  and  all 
branches  of  business  had  opportunity  to  expand.  So  far  as  the  bank 
went,  however,  it  soon  became  evident  that  politics  was  a  factor  to  be 
counted  in  the  reckoning.  The  Federal  party,  to  which  Washington  and 
Hamilton  belonged — in  other  words  the  conservative  party — controlled 
the  bank,  while  the  liberals,  who  defended  State  rights  and 
opposed  centralization,  lacked  a  similar  representation  in  the  ^HamUtoTand 
financial  world.  The  latter  wrere  known  as  Republicans,  and  Burr, 
were  the  political  forebears  of  the  Democratic  party  of  to-day. 

Among  their  leaders  was  Aaron  Burr,  who  chanced  to  be  a  shareholder 
of  the  Bank  of  New  York,  which  Hamilton  had  founded.  The  Republicans 
complained  that  they  were  unable  to  get  fair  treatment  from  the  bank,  and 
there  seems  to  have  been  some  basis  for  their  protests.  Burr  determined 
to  form  a  bank  more  closely  affiliated  with  the  adherents  of  his  own 
political  faith.  The  State  Legislature,  it  seems,  was  opposed  to  granting 
any  more  bank  charters.  Burr,  who  was  a  member  of  the  Assembly,  had 
resort  to  an  effective  device.  Drinking-water  was  to  be  obtained  only  with 
great  difficulty  in  New  York  City,  where  the  estimated  daily  consumption 
of  water  was  four  million  gallons.  Hogsheads  of  water  were  being 
imported  in  carts  from  the  country  and  sold  at  a  $1.25  each.  Private 


52 


THE  NEW  YORK  STOCK  EXCHANGE 


householders  paid  from  $15  to  $50  a  year  for  water,  while  it  cost  hotels 
from  $200  to  $400  a  year.  Burr  succeeded,  in  1799,  in  getting  a  charter 
for  the  Manhattan  Company,  which  was  ostensibly  designed 
Manhattan  to  go  into  the  business  of  selling  water  in  this  city.  His 

Company  ^  measure  contained  what  modern  politicians  call  a  “  joker,” 

chartered,  1799.  provjcjjng  that  the  surplus  capital  of  the  company  might  be 

used  “in  anything  not  inconsistent  with  the  laws  and  constitutions  of  the 
United  States  or  of  the  State  of  New  York.”  When  the  bill  had  gone 
through  he  revealed  the  joke.  The  Manhattan  Company  not  only  did  a 
business  in  water  but  founded  a  bank,  with  Nicholas  Fish,  John  Delafield, 
John  Jacob  Astor,  Richard  Yarick,  Stephen  Yan  Rensselaer,  Peter 
Stuyvesant,  John  Slidell,  and  Joshua  Sands  among  its  shareholders. 
Abundant  field  for  its  usefulness  was  afforded  by  the  rapidly  growing 
city.  New  York’s  population  in  1790  was  33,131.  It  had  grown,  in 
1800,  to  60,489. 

The  rival  institutions  made  a  united  effort,  in  1803,  to  keep  out  a  new 
competitor,  the  Merchants’  National  Bank,  which  nevertheless  succeeded 
in  getting  a  charter.  Oliver  Wolcott  was  its  first  president, 
banking^  and  caP^al  amounted  to  $1,200,000.  Cornelius  C. 

institutions.  Roosevelt  and  Daniel  D.  Tompkins  were  among  its  share¬ 

holders.  John  Slidell  was  the  president  of  New  York’s  fourth 
bank,  the  Mechanics’  National,  which  had  a  capital  of  $2,000,000.  The 
Bank  of  America  and  the  City  Bank  followed  in  1812. 

More  important  than  any  of  these  institutions  to  the  business  of  the 
country  was  the  first  Bank  of  the  United  States,  which  was  incor¬ 
porated  as  early  as  1791,  and  embodied  another  scheme  of 
Career  of  the  Hamilton’s.  Its  capital  stock  amounted  to  $10,000,000,  of 

United  states.  which  the  Government  subscribed  for  one-fifth.  The  bank 
lent  the  Government  $2,000,000  at  six  per  cent,  interest,  the 
loan  to  be  repaid  in  ten  annual  instalments  of  $200,000  each.  No  actual 
money  passed,  the  matter  being  arranged  by  an  interchange  of  warrants 
between  the  federal  authorities  and  the  institution.  The  public  was 
enabled  to  subscribe  for  the  remaining  $8,000,000  at  par,  one  quarter  of 
the  amount  of  the  subscription  being  payable  in  specie  and  three  quarters 
in  Government  stock.  Within  two  hours  after  the  opening  of  the  books 
the  stock  was  over-subscribed  to  the  extent  of  $400,000.  A  graduated 
system  of  elections  was  adopted,  which  prevented  any  individual  share¬ 
holder  from  having  more  than  thirty  votes.  Foreign  holders,  who  con¬ 
trolled  $7,200,000  of  the  stock,  had  no  vote  at  all.  Besides  the  central 
institution  in  Philadelphia,  branches  were  established  in  New  York  (where 
the  headquarters  were  at  No.  52  Wall  Street),  Boston,  Baltimore, 
Washington,  Norfolk,  Charleston,  S.  C.;  Savannah,  and  New  Orleans. 


THE  PIONEER  BANKS  OF  THE  NATION 


53 


Prosperity  that  proved  the  wisdom  of  its  foundation  attended  the 
conduct  of  the  bank’s  affairs.  In  the  twenty  years  during  which  its  charter 
was  in  force,  its  dividends  averaged  more  than  eight  per  cent.  When  its 
accounts  -were  settled  with  the  Federal  Government,  in  1802  (the  last  of  the 
Government’s  shares  having  been  sold  in  that  year  by  reason  of  a  difficulty 
experienced  in  paying  the  instalments  due  on  the  loan  from  the  bank),  the 
people  discovered  that  they  had  made  a  net  profit  of  about  fifty-seven  per 
cent,  on  the  entire  transaction,  after  repaying  the  $2,000,000  they  had 
borrowed  and  the  interest  on  the  loan.  The  Government  sold  its  shares 
for  $671,860  more  than  it  paid  for  them,  and  had  furthermore  drawn 
dividends  of  about  eight  and  three-eighths  per  cent,  a  year  on  the  average, 
while  paying  the  bank  only  six  per  cent,  a  year  in  interest.  The  public,  as 
wTell  as  its  shareholders,  had  reaped  a  notable  benefit  from  the  bank’s 
existence.  Nevertheless,  when  the  charter  expired,  in  1811,  Congress 
refused  to  renew  it.  The  enemies  of  Secretary  Gallatin  of  the  Treasury 
combined  to  defeat  the  bill  for  the  extension,  injuring  the  interest  of  their 
country  in  order  to  deal  him  a  blow.  Others  questioned  the  constitutional 
validity  of  the  original  bill  establishing  the  bank.  This  point  was  not 
settled  until  years  later,  when  Chief  Justice  Marshall,  in  the  McCulloch  case, 
decided  that  the  right  to  establish  a  United  States  bank  was  among  the 
implied  powers  given  to  Congress  by  the  Constitution.  In  1811  contro¬ 
versy  raged  hotly  over  this  question.  Certain  opponents  of  the  bank  also 
attacked  it  upon  the  ground  that  it  was  likely  to  become  a  tool  in  the 
hands  of  Great  Britain,  in  case  of  a  war,  which  the  arbitrary  action  of  the 
English  upon  the  high  seas  was  threatening  at  that  time.  It  is  difficult 
to  understand  how  they  reconciled  this  view  with  the  fact  that  foreign 
shareholders  in  the  bank  had  no  right  to  vote.  They  certainly  held  the 
view,  and  dilated  on  it  with  considerable  vigor. 

One  statesman  of  the  day,  Mr.  Desha,  of  Kentucky,  entertained  no 
doubt  that  George  III — whose  mind,  by  the  way,  was  then  trembling  on 
the  verge  of  insanity — was  the  chief  shareholder  in  the  bank,  and  was 
prepared,  through  “his  American  agent,”  to  pay  millions  for  the  renewal  of 
its  charter.  Turning  to  mythology  with  a  zeal  more  admirable  than  his 
memory,  for  a  metaphor  with  which  to  impress  his  fellow  legislators,  he 
besought  them  to  strangle  “this  infant  Hercules  in  the  cradle.”  1  He 
eventually  witnessed  the  desired  execution.  The  bank  was  obliged  to  go 
into  liquidation,  and,  on  the  eve  of  the  war  that  Desha  and  his  compeers 
had  anticipated,  was  also  forced  to  return  to  British  lenders  the  amount 
of  their  subscriptions.  The  step  advocated  by  these  men,  on  the  ground  of 
patriotism,  contributed  therefore  to  the  crippling  of  their  country  in  the 
hour  of  its  struggle  with  the  very  foe  they  professed  so  to  fear. 

1  Money  and  Banking  :  Horace  White.  Boston.  1895. 


54 


THE  NEW  YORK  STOCK  EXCHANGE 


The  War  of  1812,  so  important  to  Americans  as  an  historical  event, 
because  it  declared  to  the  world  that  they  would  not  tamely  submit  to  the 
forcible  searching  of  this  country’s  ships  by  foreign  powers  on  any  pretext, 
was  to  the  European  eye  a  minor  outgrowth  of  the  struggle  by  which  the 
allied  nations  were  uniting  to  check  the  career  of  Napoleon.  The  victories 
of  Salamanca  and  Yittoria,  and  the  taking  of  Paris,  loomed  too  largely  in 
the  eyes  of  the  foes  to  France  to  admit  of  being  greatly 
dimmed  by  Perry’s  successes  on  Lake  Erie,  or  by  the  laurels 
wrested  from  the  British  by  Scott,  in  the  battle  of  Chippewa.  Indeed,  it 
need  scarcely  be  recalled  that  the  Treaty  of  Ghent,  which  ended  the  conflict 
between  Great  Britain  and  this  country  in  December,  1814,  about  the  time 
of  Napoleon’s  banishment  to  Elba,  did  not  provide  specifically  for  America’s 
protection  against  the  searching  of  her  ships  at  sea,  although  she  had 
practically  won  what  she  wanted.  Her  victory  had  not  been  gained 
without  severe  sacrifice.  Trade  was  necessarily  disrupted  by  hostilities, 
and  the  newly  established  currency  system  was  shocked  by  the  war’s  sudden 
onslaught  upon  the  national  resources.  The  banks  suspended  specie 
payments  in  1814,  a  calamity  which,  in  Gallatin’s  judgment,  would  have 
been  avoided  if  the  Bank  of  the  United  States  had  obtained  its  new  charter 
three  years  before. 

Meanwhile  the  New  York  dealers  in  securities  experienced  a  natural 
decrease  in  the  volume  of  their  business.  The  period  was  one  of  decided 
commercial  depression,  and  the  “bear”  of  these  early  days  lost  count  of 
his  triumphs.  The  suspension  of  the  banks  accentuated  the  current 
difficulties.  They  were  accused  at  the  time  of  having  suspended  specie 
payment  without  sufficient  cause.  Certainly  they  had  in  many  parts  of 
the  country  contrived  to  hamper  the  progress  of  trade  and 
Early  banking  work  injustice  to  individuals  by  reason  of  their  dangerous 
methods  and  habits  of  discrimination.  Their  defects  were  by 
no  means  especially  characteristic  of  the  period  of  hostilities  which  marked 
President  Madison’s  administration.  They  formed  a  serious  handicap  to 
the  nation’s  advancement  in  the  early  half  of  the  last  century,  and  the 
ready  carrying  of  this  burden  was  in  itself  a  remarkable  tribute  to  the 
vigor  of  the  people  and  the  natural  resources  of  the  country.  Banks  of 
this  period  were  loosely  formed.  Legislative  acts  were  passed  which 
authorized  the  appointments  of  commissioners  for  the  purpose  of  receiving 
bank  subscriptions,  but  put  no  effective  check  upon  the  fashion  in  which 
the  appointees  discharged  their  duties.  Business  could  be  begun  after  the 
payment  of  the  first  or  second  instalment  on  the  subscriptions,  and  when 
the  time  for  the  next  instalment  came  due,  the  subscribers  in  most  cases 
would  pledge  their  shares  or  discount  their  personal  notes  with  the  bank 
to  raise  the  money  with  which  to  make  payment. 


THE  PIONEER  BANKS  OF  THE  NATION 


55 


Conditions  in 
1818-28. 


It  will  thus  be  seen  that  these  institutions  were  operating  upon  but 
a  fraction  of  their  proper  capital,  and  complacently  assisting  in  the  under¬ 
mining  of  their  own  foundations.  President  Biddle,  of  the  second  Bank  of 
the  United  States,  to  which  further  reference  will  be  made, 
declared,  in  1828,  that  there  were  544  banks  in  this  country, 
of  which  144  had  been  openly  declared  bankrupt  and  about 
50  had  suspended  payment.  In  the  report  of  a  committee  appointed  by 
the  New  York  Legislature  to  investigate  the  banking  question,  made  in 

1818,  one  year  after  the  stock  brokers  formed  a  new  organization  and 
adopted  a  constitution,  appear  these  statements : 

“Of  all  aristocracies  none  more  completely  enslave  a  community  than 
that  of  the  present  mode  of  conducting  banking  establishments.  Like  the 
siren  of  the  fable,  they  entice  to  destroy.  They  hold  the  purse  strings  of 
society ;  and,  by  monopolizing  the  whole  of  the  circulating  medium  of  the 
country,  they  form  a  precocious  standard  by  which  all  property  in  the 
country,  houses,  lands,  debts  and  credits,  personal  and  real  estate  of  all 
descriptions,  are  valued :  thus  rendering  the  whole  community  dependent 
on  them:  proscribing  every  man  who  dares  to  expose  their  unlawful 
practices :  if  he  happens  to  be  out  of  their  reach,  so  as  to  require  no  favors 
from  them,  his  friends  are  made  the  victims.  So  no  one  dares  to  complain. 
The  committee,  on  taking  a  general  view  of  the  State,  and  comparing 
those  parts  where  banks  have  been  for  some  time  established  with  those 
that  had  had  none,  are  astonished  at  the  alarming  disparity.  They  see  in 
the  one  case  the  desolation  they  have  brought  to  an  immense  number  of 
wealthy  farmers,  and  they  and  their  families  suddenly  hurled  from  wealth 
and  independence  into  the  abyss  of  ruin  and  despair.” 

The  committee’s  report  proceeds  to  dwell  in  terms  of  marked  apprehen¬ 
sion  upon  the  prospects  of  the  control  of  elections  by  the  banks.  One  can 
make  considerable  allowance  for  exaggeration  in  this  document  and  still 
find  abundant  evidence  of  injustice  and  oppression.  John 
White,  cashier  of  the  Baltimore  branch  of  the  second  Bank  of 
the  United  States,  in  a  report  to  the  Secretary  of  the  Treasury 
more  than  a  decade  later,  refers  to  a  severe  flurry  in  the  money  market  in 

1819,  a  scarcity  of  money  in  the  spring  of  1822,  “numerous  and  very 
extensive  failures”  at  New  York,  Savannah,  Charleston  and  New  Orleans, 
in  1825,  and  a  “convulsion”  among  New  York’s  financial  institutions  in 
the  following  year.  He  also  speaks  of  a  lack  of  money  among  New  York 
and  New  England  traders  in  the  winter  of  1827-28,  subsequent  failures  of 
banks  in  Rhode  Island  and  North  Carolina,  and  of  New  England  manufac¬ 
turers,  and  adds  that  some  of  the  Georgia  banks  have  just  refused  to 
redeem  their  notes  in  specie.  Alluding  to  the  sources  of  prosperity  with 
which  nature  has  endowed  the  soil,  and  to  the  industrious  temper  of  the 
people,  he  adds  these  words : 


John  White’s 
report,  1822. 


56 


THE  NEW  YORK  STOCK  EXCHANGE 


“Calamities  of  an  injurious  and  demoralizing  nature,  occurring  with 
singular  frequency  amidst  a  profusion  of  the  elements  of  wealth,  are  well 
calculated  to  inspire  and  enforce  the  conviction  that  there  is  something 
radically  erroneous  in  our  monetary  system,  were  it  not  that  the  judgment 
hesitates  to  yield  assent  when  grave,  enlightened,  and  patriotic  Senators 
have  deliberately  announced  to  the  public,  in  a  recent  report,  that  our 
system  of  money  is  in  the  main  excellent,  and  that  in  most  of  its  great 
principles  no  innovation  can  be  made  with  advantage.” 

The  country  was  not  on  the  road  to  ruin,  despite  the  genuine  evils  of 
the  time  and  the  jeremiads  which  they  provoked.  It  was  in  reality  feeling 
its  way.  Its  sporadic  calamities  may  be  likened  to  growing-pains.  Side 
by  side  with  the  popular  indulgence  in  speculative  and  financial  follies,  the 
work  of  sinking  deeper  the  foundations  of  representative  government, 
under  the  guidance  of  Jefferson  and  his  fellow  partisans,  went  on.  We 
must  retrace  our  steps  to  note  several  important  features  of  the  trend  of 
affairs  a  century  ago.  In  1803,  two  years  after  Jefferson’s 
The  Louisiana  inauguration,  Napoleon  sold  to  us  the  enormous  territory  of 
Louisiana  for  $15,000,000,  and  in  consideration  of  a  quit 
claim  of  all  that  France  owed  us  on  the  score  of  spoliations.  The  following 
year,  Burr,  who  had  deserted  the  ranks  of  the  Federalists,  was  defeated  for 
Governor  of  New  York,  largely  by  Hamilton’s  influence.  The  duel  in  which 
he  killed  Hamilton  followed,  and  the  death  of  the  leader  of  the  Federalist 
party  presaged  its-  downfall.  Burr’s  ill-conceived  scheme  of  Western 
empire,  and  his  arrest,  trial  for  treason,  and  acquittal,  wound  up  his  public 
career.  In  1811  General  Harrison  defeated  Tecumseh’s  Indians  in  the 
Battle  of  Tippecanoe  and  paved  the  way  toward  the  siding  with  the  British 
by  the  redskins  in  the  War  of  1812. 


IY 

A  NEW  MARKET  AND  THE  FIRST  CONSTITUTION 

HE  student  of  American  history  will  detect  a  remarkable 
index  to  the  genius,  the  vigor,  the  masterful  self-confidence 
of  the  adolescent  Republic  in  the  events  which  immediately 
succeeded  the  War  of  1812.  By  the  blood  shed  upon 
Breed’s  Hill  and  the  suffering  endured  at  Yalley  Forge,  this 
infant  among  nations  received  her  baptism.  The  struggle 
marked  by  Perry’s  feats  on  Lake  Erie  and  Jackson’s  victory  at  New 
Orleans,  and  illuminated  by  the  blazing  Capitol,  as  the  British  made 
their  way  out  of  Washington,  became  her  confirmation  in  the  faith  of 
democracy.  Upon  the  close  of  this  conflict,  in  which  a  population  equal 
only  to  that  of  New  York  State  to-day  had  withstood  the 
power  of  Great  Britain  in  the  defence  of  national  dignity,  The  New  York 
there  came  a  revival  of  industry  and  an  expansion  of  business  IxThang^  Board 
that  proclaimed  to  the  world  the  belief  of  Americans  in  their  develops  from 
own  future.  Despite  the  prostrating  results  of  the  war  and  the .c°m“frclal 

,.  ,  .  .  ,  i  ,  ,  .  revival  following 

an  immediate  increase  in  the  national  debt,  new  enterprises  the  War  of  1812. 
sprang  up  to  try  their  fortunes  under  the  new  conditions. 

This  movement  stimulated  the  public  dealing  in  securities  and  brought 
about  the  formal  organization  of  the  New  York  Stock  and  Exchange 
Board. 

It  is  natural  to  believe  that  the  reason  the  stock  brokers  of  this  city 
had  not  previously  formed  themselves  into  so  coherent  an  association,  or 
adopted  a  regular  constitution,  was  simply  because  the  proportions  of 
their  business  had  never  warranted  it.  Manifestly  the  country  itself  had 
not  reached  theretofore  the  stage  necessary  to  the  establishment  of  a 
sound  basis  for  trading  in  investment  securities.  Neither  its  government 
nor  its  mercantile  activity,  in  Madison’s  day,  had  quite  emerged  from  the 
formative  period.  The  very  theories  upon  which  the  colonies  had  based 


58 


THE  NEW  YORK  STOCK  EXCHANGE 


their  right  to  independence  required  the  casting  aside  of  a  great  part  of 
their  heritage  of  law  and  custom.  They  were  trying  a  stupendous 
experiment  before  the  eyes  of  civilization,  substituting  the  representative 
rule  of  a  people  for  the  domination  of  a  crown  and  the  privileges  of  a  titled 
aristocracy.  Having  shattered  the  most  powerful  of  precedents,  it  was 
not  to  be  expected  that  precedent  in  any  form  would  directly  control  their 
decisions.  They  had  therefore  to  tread  an  unexplored  path  in  the  fields  of 
administration  and  finance.  It  required  the  lapse  of  a  generation  and  the 
cohesion  of  the  States  in  another  war  to  assure  the  entire  American  people 
that  they  had  achieved  a  permanent  success. 


]UCH  revival  of  industry  as  became  evident  shortly  after  the  signing 
of  the  Treaty  of  Ghent  was  rendered  possible  not  only  by  the 
extension  of  public  confidence,  but  by  the  previous  growth  in 
population  and  trade  which  contributed  to  justify  that  confidence.  This 
growth,  in  fact,  was  a  striking  characteristic  of  the  first  half  century  of  the 
increase  in  the  nation’s  life,  the  depression  coincident  with  the  war  and  the 
country’s  setback  of  1818  and  1819  forming  its  only  serious  interrup- 

popuiation.  tions  until  the  panic  of  1837.  In  the  period  between  the  War 

of  Independence  and  the  inauguration  of  Madison,  the  inventive  genius  of 
the  people  displayed  its  power  and  assisted  in  the  building  of  industry. 

In  1790  the  population  of  the  States  was  estimated  at  3,927,214, 
of  which  there  were  approximately  111,000  Western  settlers.  Ten  years 
later  the  number  of  settlers  in  the  West  had  considerably  more  than 
trebled,  and  the  total  population  had  reached  5,308,000 — that  of  New 
York,  which  had  gained  more  largely  than  most  of  her  sister  States, 
amounting  to  589,000.  In  1810  the  country’s  population  had  risen  to 
7,239,881  persons.  Kentucky,  Vermont,  Tennessee,  and  Ohio  had  by  turns 
been  admitted  to  the  Federal  family,  and  the  centre  of  population  had 
moved  to  a  point  eighteen  miles  wrest  of  Baltimore.  The  cotton  gin,  invented 
by  a  schoolmaster,  Eli  Whitney,  had  been  at  work  since  1793,  revolu¬ 
tionizing  the  chief  industry  of  the  South.  We  exported  five  million  dollars’ 
worth  of  cotton  in  1800,  and  twenty-four  years  later  this  figure  had 
increased  to  twenty-two  millions.  Fulton  had  perfected  the  “  Clermont,” 
the  first  steam  vessel  to  achieve  a  commercial  success,  and  Stevens  was 
making  almost  equal  strides  in  advancing  the  science  of  navigation.  Our 
total  exports  increased  from  twenty  millions,  in  1790,  to  seventy  millions, 
in  1800,  and  our  imports  grew  from  twenty-five  to  more  than  ninety 
millions  in  the  same  period. 

These  figures  speak  with  eloquent  tongues.  Notwithstanding  the 
lingering  effect  of  past  disasters,  the  banking  follies  of  the  time,  and  the 


A  NEW  MARKET  AND  THE  FIRST  CONSTITUTION 


59 


Conquest  of 
the  West. 


speculative  tendency  that  resulted  frequently  in  mercantile  failures,  the 
period  between  Washington’s  inauguration  and  the  second  war  with  Great 
Britain  was  one  of  expansion  in  a  desirable  sense.  It  was  marked  by  giant 
strides  in  the  direction  of  conquering  the  wilderness  which  had  for  centuries 
been  the  home  of  the  savage,  and  was  destined  to  swarm  with  the  cities  of 
a  free  power  of  civilization.  The  vigorous  young  nation  had  no  sooner 
repelled  the  foes  that  threatened  its  existence  than  it  found  the  fringe  of  the 
Atlantic  too  narrow  for  its  needs.  Already  its  adventurous 
spirits  began  the  task  of  exploring  the  treasures  of  the  Con¬ 
tinent,  pushing  our  frontier  with  the  axe  and  the  rifle,  at  the 
sacrifice  of  civilization’s  baubles,  and  at  the  peril  of  their  scalps.  The 
veterans  of  Trenton  and  Saratoga,  the  followers  of  Marion  and  Jackson, 
exchanged  the  conventional  warfare  of  Caucasian  troops  for  the  forest 
conflict  with  Indian  trickery,  and  for  the  conquest  of  the  plains.  They  met 
their  red  opponent  often  at  the  thresholds  of  their  homes,  or  fired  at  him 
through  the  loopholes  of  rude  block-houses,  while  their  wives  handled  the 
powder  flasks  and  their  children  hung  around  their  knees.  By  the  smoking 
remnants  of  ruined  settlements,  by  the  butchery  of  women  and  babes,  by 
the  transformation  of  the  woodland  path  into  a  charnel,  and  the  wayside 
shrubbery  into  an  assassin’s  shield,  by  the  white  captive’s  fatal  agony  at 
the  stake,  these  pioneers  paid  the  penalty  of  their  enterprise.  Hardship 
was  mingled  wTith  the  bread  they  ate  and  danger  watched  nightly  at  their 
couches.  But  they  proved  able  to  assert  the  claim  of  a  new  nation  to  the 
New  World,  and  to  demonstrate  the  inevitable  victory  of  the  higher  race. 

What  they  accomplished  civilization  inherited.  Moralists  have  since 
found  much  occasion  to  lament  over  their  robbery  of  America  from  the 
aborigines.  But  the  idea  that  a  few  thousands  of  wandering  savages,  who 
assuredly  did  not  create  this  continent,  had  the  right  to  shut 
off  the  rest  of  humanity  from  America,  as  an  English  lord 
forbids  strangers  to  trespass  on  his  preserves,  is  preposterous 
upon  its  face.  True,  we  cannot  deny  that  they  acted  according  to  their 
rights  in  resisting  the  invader,  first  with  the  bow  and  arrow  and  then  with 
his  own  weapons.  The  mysterious  consciousness  of  their  race  appeared  to 
give  them  warning  of  the  coming  doom.  The  air  of  civilization  was  too 
rare  for  their  lungs.  The  white  man’s  vices  were  poison  to  their  system. 
Whether  or  not  the  savage  believed  that  the  settlers  would  attack  him, 
even  if  he  should  show  a  disposition  to  peace,  he  certainly  divined  in  the 
advent  of  a  new  race  the  menace  of  disaster.  In  his  own  fierce  fashion  he 
resisted  progress,  and  for  his  resistance  paid  the  reckoning. 

Settlements  gave  way  to  towns.  The  church,  the  school,  and  the 
“general”  store  replaced  the  trading  post  and  the  frontiersman’s  cabin. 
The  hoof  prints  of  the  Pawnee’s  flying  mustang,  and  the  tracks  of  the 


The  right  of 
the  Indian. 


60 


THE  NEW  YORK  STOCK  EXCHANGE 


buffalo  herd  which  the  exulting  braves  pursued,  were  bisected  by  the  white 
man’s  plough.  Presently  the  maize,  with  which  the  Sioux  or  the  Mohawk 
was  wont  to  gorge  himself  upon  feast  days  set  apart  for  contests  of 
gastronomic  prowess,  began  to  find  its  way,  either  as  grain  or  in  the 
form  of  meat,  to  the  shores  of  Europe.  As  the  farmer  followed  the  path 
blazed  by  the  fur  dealer,  so,  too,  the  manufacturer  decided  to  explore. 
Capital,  always  timid  at  the  outset,  started  quietly  to  flow  into  all  sections 
of  this  new  country  through  the  narrow  channels  formed  by 
the  2btie°rll0Wed  se^ers’  tracks,  when  once  the  way  had  been  found  safe.  The 
streams,  as  they  ran,  broadened  and  deepened  their  beds,  and 
spread  at  favorable  places  into  pools  and  little  lakes — the  first  banks 
of  the  newly  formed  communities.  Population  acted  like  a  fluid,  availing 
itself  of  every  opportunity  to  spread  out  into  a  larger  area.  Wherever 
rich  soil  or  mineral  wealth  or  any  other  natural  advantages  were 
discovered  near  settled  territory,  the  hardy  population  of  America’s  early 
days  moved  forward  anew,  and  everywhere  it  carried  civilization  and 
order,  free  speech,  a  free  conscience,  and  free  schools.  To  the  shores  of  the 
Penobscot,  to  the  silver-topped  palmetto  groves  of  Florida,  to  the  soft 
climate  of  the  Pacific  coast,  the  vanguard  of  a  new  people  bore  its  insignia. 


[E  have  grown  so  complacently  accustomed  to  the  existence  of  great 
national  obligations  in  our  day  and  generation  that  we  are  rather 
inclined  to  associate  them  with  national  growth  and  prosperity. 
In  the  first  eight  years  of  the  nineteenth  century,  the  distinction  between  a 
country’s  debts  and  its  wealth  was  measurably  understood.  Jefferson  and 
his  party  had  been  preaching  with  vigor  the  doctrine  that  the  Government 
was  not  some  mysterious  heaven-sent  agency,  but  an  instrument  fashioned 
by  the  people  for  their  own  use.  The  citizens  realized  that  the  money  spent 
by  the  Government  was  actually  spent  by  themselves,  and  that  an  increase 
in  its  obligations  meant  the  saddling  of  further  burdens  upon  them. 
Reference  has  been  made  to  the  fact  that  Jefferson,  like  many  other 
champions  of  the  people,  was  apt  to  stumble  over  the  principles  of  finance. 
Public  debt  This  weakness,  however,  by  no  means  extended  to  the  tolera- 
reduced  by  tion  of  public  extravagance.  The  author  of  the  Declaration 
Jefferson’s  Gf  Independence  proved  his  sense  of  a  statesman’s  duty  to  be 

economy.  as  strong  as  his  appreciation  of  the  rights  of  men.  His 

private  mode  of  living  was  an  example  in  simplicity  and  his  administra¬ 
tion  an  example  of  economy.  When  he  succeeded  John  Adams,  who  had 
served  four  years,  in  1801,  he  found  the  public  debt  to  be  about  eighty- 
three  million  dollars.  When  he  retired  from  office,  in  1809,  it  had  been 
reduced  to  fifty-seven  millions,  notwithstanding  the  fact  that  Louisiana 
had  cost  us  about  fifteen  millions. 


A  NEW  MARKET  AND  THE  FIRST  CONSTITUTION 


61 


Jefferson’s  administration  was  characterized  not  only  by  prudence, 
but  by  the  maintenance  of  an  invaluable  peace  under  the  most  trying 
circumstances.  The  exasperating  conduct  of  Great  Britain  toward  our 
merchant  marine,  which  eventually  led  to  the  War  of  1812,  was  being 
closely  paralleled  by  France.  A  considerable  portion  of  the  people, 
smarting  under  such  incidents  as  the  attack  upon  the  frigate  Chesapeake, 
clamored  for  war  with  one  power  or  the  other,  or  both,  and 
the  Embargo  Act,  which  Jefferson  put  upon  our  ports  in  1807,  A^te  i^7arg° 

did  not  tend  to  allay  the  citizens’  anger.  It  tied  up  shiploads 
of  perishable  merchandise  upon  our  docks  and  resulted  in  many  serious 
losses.  It  is  not  classed  among  the  acts  to  which  its  author  is  indebted  for 
his  fame.  Yet  it  was  undoubtedly  preferable  to  war  at  that  particular 
time.  Jefferson,  whose  eyes  saw  into  the  nature  of  the  people’s  rights  and 
the  means  of  their  preservation  as  did  the  eyes  of  no  other  of  his  contem¬ 
poraries,  saw  also  their  needs.  He  knew  that  the  young  nation  must  have 
a  period  for  quiet  growth  before  attempting  another  great  An  an 
conflict,  though  he  doubtless  expected  the  conflict  eventually  people  and  a 
to  come.  To  his  policy  of  endurance  his  party  owed  the  noisy  wlse  peace> 
protests  of  the  short-sighted  and  the  strengthening  of  its  hold  upon  the 
mass  of  the  people.  F or,  no  matter  how  fiercely  their  wrath  had  burned 
at  times,  his  countrymen  realized,  when  Jefferson  bade  them  farewell,  that 
he  had  served  them  with  wisdom. 

It  is  difficult  to  estimate  the  value  to  the  nation’s  life  afforded  by  the 
influence  of  such  a  man  as  Jefferson  in  the  days  when  its  character  was 
plastic.  He  has  been  the  subject  of  bitter  attack  by  certain  modern 
commentators  who  are  indignant  that  a  public  man  should  make  mistakes 
or  that  a  statesman  should  also  be  a  politician.  But  no  man  who  denies 
to  Jefferson  a  place  among  the  master  builders  can  admit  that  the  mar¬ 
vellous  strides  which  this  country  has  made  in  manufactures,  in  trade,  in 
population,  in  wealth,  in  humanity’s  betterment,  are  in  anywise  due  to  the 
fundamental  democracy  of  its  governmental  system.  It  is  possible  that 
the  horrors  and  ravages  of  the  Civil  War  might  have  been  utterly  avoided 
if  Congress  had  taken  his  advice  in  the  latter  part  of  the  eighteenth 
century.  Though  himself  a  slaveholder,  he  introduced  a  measure  pro¬ 
viding  for  the  abolition  of  slavery — an  institution  already  the  subject  of 
hot  debate — at  the  century’s  end.  Fate  indulged  in  the  grim  satire  of 
carrying  it  almost  to  success.  It  failed  of  passage  by  a  single  vote. 


SF  Congress  found  it  impossible  to  pay  the  cost  of  the  War  of  1812  by 
direct  taxation,  the  country  had,  at  least,  reason  to  rejoice  that  its 
lawmakers  did  not  have  recourse  to  the  evil  system  of  issuing  irre¬ 
deemable  paper  currency.  The  fruits  of  experience  had  been  dearly  bought, 


62 


THE  NEW  YORK  STOCK  EXCHANGE 


but  they  had  not  been  lost.  Bonds  were  issued  instead  of  legal  tenders. 
The  debt  of  the  nation,  which  dwindled  under  Jefferson’s  pruning  hook, 
had  risen  in  1816  to  $127,000,000.  But  the  country  was 
Enormous  nothing  daunted.  Trade,  it  has  been  noticed,  rose  with  fresh 
national  debt.  vigor  at  the  war’s  close.  Congress  plumed  itself  upon  the 
strength  of  the  American  people  and,  foreseeing  the  possi¬ 
bility  of  winning  more  favors  from  Mars,  appropriated  $320,000  to 
build  a  steam  frigate  designed  by  Robert  Fulton.  The  cotton  industry, 
which  boasted  only  four  factories  in  1804— the  year  Hamilton,  by  his 
death,  proved  Burr’s  marksmanship  and  malice— had  half  a  million  spindles 
running  in  1815.  The  shipping  industry  having  been  crippled  by  Jefferson’s 
embargo,  Northern  capital  turned  to  the  manufacture  of  cloth.  This  city 
had  doubled  itself  since  the  beginning  of  the  new  century.  A  steam  ferry 
service  connected  it  with  Hoboken.  In  1817  the  time  of  the  passage  by 
steamboat  from  New  York  to  Albany  was  reduced  to  eighteen  hours. 

In  this  year  the  substantial  stock  brokers  of  the  city  comprised  eight 
firms  and  nineteen  men  in  business  as  individuals.  They  were  accustomed 
to  meet  in  the  office  of  Samuel  J.  Beebe  in  the  old  Tontine  Coffee  House, 
which  we  have  seen  was  for  years  a  rendezvous  for  business  men  of  all 
classes.  The  political  horizon  had  been  pretty  thoroughly  cleared,  and  it 
is  reasonable  to  suppose  that  the  banks  had  ceased  to  extend  accommoda¬ 
tions  to  merchants  and  brokers  with  reference  to  their  convictions  as  to 
our  relations  with  England  and  the  right  method  of  interpreting  the 
United  States  Constitution.  The  conservative  Federal  party  had  crum¬ 
bled  away,  in  fact,  and  the  Republicans  had  a  clear  field. 

The  second  Bank  of  the  United  States,  the  most  famous  financial  insti¬ 
tution  in  the  country’s  history,  had  been  started  in  a  manner  to  which 
attention  will  be  called  in  succeeding  pages.  Speculation  was  busy  with  its 
shares  and  with  those  of  other  banks,  and  of  the  new  marine  and  fire  insur¬ 
ance  corporations  which  had  sprung  up  at  the  close  of  the  wrar.  Orders 
began  to  flow  in  upon  the  brokers.  They  were  required  to  buy  and  sell,  not 
only  Government  bonds,  but  the  securities  of  all  these  new  concerns,  and 
they  determined  that  the  formation  of  a  more  coherent  organization  would 
be  an  aid  to  the  conduct  of  their  business. 

On  February  25, 1817,  there  took  place  a  meeting  in  Mr.  Beebe’s  office, 
at  which  thirteen  individual  brokers  and  seven  firms — through  their  repre- 
Meeting  of  the  sentatives — attended.  They  passed  a  resolution  deciding 
stock  brokers  in  upon  the  starting  of  a  new  association,  selected  Nathaniel 
Mr.  Beebe’s  office.  prjme  as  presiding  officer  and  John  Benson  as  secretary,  and 
chose  a  committee  on  organization.  This  committee  w’as  probably  respon¬ 
sible  for  the  selection  of  the  name  agreed  upon — The  New  York  Stock  and 
Exchange  Board.  They  reported  a  set  of  rules,  now  known  as  the  Consti- 


A  NEW  MARKET  AND  THE  FIRST  CONSTITUTION 


63 


tution  of  1817,  which  was  adopted  on  March  8th.  Anthony  Stockholm 
was  elected  the  first  president.  The  rales  prescribed  in  detail  the  methods 
of  transacting  the  business  of  dealing  in  securities  and  remained  in  force 
for  three  years,  several  new  regulations  being  added  from  time  to  time. 
The  most  striking  feature  of  this  primitive  constitution  was  the  amend¬ 
ment,  passed  a  week  after  the  adoption  of  the  first  set  of  rales,  which 
provided  for  the  expulsion  of  any  member  found  guilty  of  making  a 
fictitious  contract — in  other  words  a  “wash”  sale.  The  immediate 
occasion  of  this  amendment  was  a  fictitious  sale  by  John  G.  Warren  to 
William  G.  Bucknor,  of  fifty  shares  of  the  stock  of  the  Manufacturing  Bank 
at  68,  which  took  place  on  March  13th.  The  Board  ordered  the  record 
of  the  transaction  expunged  from  the  minutes  twro  days  later,  and  then 
passed  the  amendment  designed  to  cover  such  cases.  Fortunately  for  the 
culprits,  it  was  not  made  retroactive.  Both  their  names  appear  in  the 
list  of  the  members  who  adopted  the  revised  constitution  of  1820. 

Among  the  men  who  attended  the  meeting  on  February  25,  1817,  was 
Philip  Kearny.  The  proceedings  of  that  meeting,  the  rules  later  enacted 
(which  were  modeled  largely  after  the  rules  of  the  Board  of  Brokers  of 
Philadelphia),  and  the  records  of  the  subsequent  meetings  in  that  year  were 
compiled  in  one  document,  which  did  not  find  its  way  into  the  archives  of 
the  New  York  Stock  Exchange  until  1900.  In  the  year  last  named, 
Frederic  Grand  de  Hauteville,  whose  wife  was  a  granddaughter  of  Philip 
Kearny,  chanced  to  remark  to  Frank  K.  Sturgis,  former  president  of  the 
Stock  Exchange,  at  a  dinner  w^here  both  were  guests,  that  Mrs.  de  Hauteville, 
in  ransacking  a  chest  in  an  attic  room  of  the  Kearny  homestead  at  Newark, 
New  Jersey,  had  discovered  an  old  manuscript,  which  seemed  to  contain  the 
first  constitution  of  the  Stock  Exchange.  Mr.  Sturgis  naturally  wTas  aroused. 
He  examined  the  book  a  few  days  later  and  discovered  that  it  was  indeed 
the  long  missing  document  of  1817.  Mrs.  de  Hauteville  presented  it  to 
him,  and  Mr.  Sturgis  promptly  gave  it  to  the  Stock  Exchange  management. 
Its  contents — except  for  slight  change  in  abbreviations,  spelling,  and 
punctuation— were  as  follows: 


CONSTITUTION 

OF  THE 

NEW  YORK  STOCK  EXCHANGE  BOARD,  1817. 


At  a  meeting  held  February  25,  1817,  at  the  office  of  Sam’l  J.  Beebee,  were  appointed  Nath’l  Prime, 
President;  John  Benson,  Secretary. 

Resolved,  That  it  is  desirable  to  constitute  a  Board  or  Association  of  Brokers  in  this  city  for  the 
transaction  of  their  business  at  their  Board. 

Resolved,  That  a  committee  of  three  be  appointed  to  draw  up  a  report ;  at  another  meeting  articles 
of  association.  Nathaniel  Prime,  Wm.  H.  Robinson,  A.  H.  Lawrence,  Committee. 


64 


THE  NEW  YORK  STOCK  EXCHANGE 


Gentlemen  Present— Butler  &  Nevins,  L.  A.  Bleecker,  S.  Nathan,  B.  Hart,  ffm.  G.  Bucknor,  J.  &  J. 
Bleecker;  Prime,  Ward  &  Sands,  A.  H.  Lawrence  &  Co.,  Wm.  H.  Robinson,  Wm.  J.  Robinson,  Bleecker  & 
Lefferts,  Frederick  A.  Tracy,  B.  Huntington,  John  Roe,  P.  Kearny,  Smith  &  Lawton,  John  A.  Davenport, 
John  G.  Warren,  A.  N.  Gifford  &  Co.,  Samuel  J.  Beebee. 

Gentlemen  Absent — J.  G.  Ogden  &  Co.,  G.  S.  Mumford,  J.  Foote,  A.  Stockholm,  H.  Post,  Jr.;  H. 
Ward,  L.  Bleecker. 

Resolved,  That  this  meeting  adjourn  to  the  calling  of  the  committee  at  such  time  and  place  as  shall 
be  by  them  named. 

Rules  to  be  adopted  and  observed  by  the  “New  York  Stock  and  Exchange  Board,” as  reported  by 
a  committee  appointed  at  a  meeting  held  on  February  25,  1817,  and  passed  March  8, 1817. 

1.  A  President  and  Secretary  shall  be  elected  by  ballot  on  the  second  Saturday  of  March,  annually. 

2.  It  shall  be  the  duty  of  the  President  to  call  the  Stocks  at  the  hour  that  may  be  fixed  upon  by  the 
Board,  from  time  to  time,  as  the  season  may  require' —  and  that  in  case  of  the  absence  of  the  President  or 
Secretary  the  members  present  may  choose  one  in  his  stead  for  the  calling  of  Stocks  as  President  pro 
tempore. 

3.  It  shall  be  the  duty  of  the  Secretary  to  keep  the  minutes  of  the  Board  in  a  book  for  the  purpose, 
an  account  of  all  fines,  and  to  collect  the  same,  and  also  a  register  of  all  actual  sales  of  Stocks  made  at  the 
Board,  the  register  to  be  accessible  to  the  members  of  the  Board  only. 

4.  Any  member  interrupting  the  President  while  calling  the  Stocks,  by  speaking  on  any  other  busi¬ 
ness,  shall  pay  a  fine  of  not  less  than  six  nor  more  than  twenty -live  cents  for  each  offence,  at  the  discretion 
of  the  President. 

5.  The  election  of  new  members  shall  be  by  ballot — he  or  they  must  be  proposed  at  least  three  days 
preceding  the  election,  and  three  black  balls  shall  exclude. 

6.  No  motion  for  altering  the  rules,  the  time  of  meeting,  or  any  other  business  respecting  the  Board, 
shall  be  acted  upon  until  at  least  ten  days  after  the  motion  is  made,  unless  authorized  by  the  unanimous 
consent  of  the  Board.  A  motion  not  seconded  shall  be  considered  as  lost. 

7.  In  all  cases  two-thirds  of  the  Board  must  be  present  to  form  a  quorum  to  do  business,  except 
the  calling  of  the  Stocks. 

8.  The  President  shall  decide  all  questions  of  order,  but  an  appeal  may  be  made  to  the  Board ;  a 
majority  of  the  members  present  shall  decide  the  question  of  order. 

9.  When  any  question  is  before  the  Board,  no  member  shall  speak  more  than  twice  on  the  same 
question  without  leave,  nor  shall  any  member  be  suffered  to  interrupt  another  while  speaking. 

10.  Any  member  being  duly  elected  President  or  Secretary,  refusing  to  act,  or  neglecting  his  duty,  as 
such,' shall  be  fined  a  sum  not  less  than  five  nor  more  than  twenty  dollars,  at  the  discretion  of  a  majority 
of  the  Board,  provided  always  that  he  has  not  served  before  in  either  situation. 

11.  The  rates  of  commission,  viz. :  On  Funded  Debt  and  net  amount,  not  less  than  %  per  cent.;  on 
Bank  and  other  complete  shares,  not  less  than  %  per  cent.;  on  Insurance  Stock  complete,  not  less  than 

per  cent.;  on  Insurance  Scrip,  Bank  and  all  other  Scrip,  not  less  than  %  per  cent,  on  the  nominal 
amount;  Foreign  Bill  of  Exchange,  not  less  than  %  per  cent.;  Inland  Bills  of  Exchange,  not  less  than  %  per 
cent.;  Cashing  Promissory  Notes  and  Acceptances  Payable  in  New  York,  not  less  than  %  per  cent,  on  the 
nominal  amount. ;  Specie  not  less  than  %  per  cent,  on  the  nominal  amount ;  Obtaining  Money  on  Mortgage, 
not  less  than  1  per  cent,  on  the  nominal  amount. 

12.  All  fines  shall  be  at  the  disposal  of  a  majority  of  a  quorum  of  the  Board. 

13.  On  any  motion  before  the  Board,  at  the  request  of  three  members,  the  decision  shall  be  held  open 
for  three  successive  days,  in  order  that  every  member  of  the  Board  may  have  an  opportunity  of  giving  his 
opinion. 

14.  The  fines  for  non-attendance  at  the  calling  of  the  Stocks  shall  be  l-16th  of  a  dollar,  unless  sick  or 
out  of  the  city,  but  when  two  or  more  members  compose  one  house  of  trade,  then  the  attendance  of  one  is 
sufficient  at  the  calling  of  the  Stocks— any  member  may  commute  by  paying  ten  dollars,  in  lieu  of  fines,  per 
annum.  The  fines  for  non-attendance  and  the  sum  paid  for  commutation  shall  be  first  applied  to  the 
payment  of  rent.  In  the  payment  of  rent,  each  member  pays  a  proportion,  whether  he  belongs  to  a  house 
of  two  or  more  or  not. 

15.  Any  member  refusing  to  comply  with  the  foregoing  rules  may  have  a  hearing  before  the  Board, 
and  if  he  shall  still  persist  in  refusing,  two-thirds  of  the  Board  may  declare  him  no  longer  a  member. 

16.  No  person  shall  be  considered  eligible  to  be  balloted  for  as  a  member  unless  he  has  been  in  the 
business  for  the  term  of  one  or  more  years,  either  as  a  broker  or  an  apprentice,  immediately  preceding 
the  election. 


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A  NEW  MARKET  AND  THE  FIRST  CONSTITUTION 


65 


17.  All  questions  of  dispute  in  the  purchase  or  sale  of  Stocks  shall  be  decided  by  a  majority  of  the 
Board,  and  in  default  of  any  contract  for  the  delivery  and  payment  of  Stocks,  the  defaulter  shall  be  held 
liable,  unless  he  can  surrender  a  principal  who  shall  be  considered  competent  by  a  majority  of  the  Board. 
The  principals  of  a  purchase  or  sale  to  be  {riven  at  the  time  of  contract,  if  required. 

18.  Passed  by  unanimous  vote  March  15, 1817,  that  no  fictitious  sale  or  contract  shall  be  made  at 
this  Board.  Any  member  or  members  making  a  fictitious  sale  or  contract  shall,  upon  conviction  thereof, 
be  expelled  from  the  Board. 

19.  Additional  Article,  the  more  effectually  to  carry  into  execution  the  Second  Article,  for  the  appoint¬ 
ment  of  a  President  and  Secretary  pro  tern.,  viz. :  Passed  July  1,  1817.  That  in  all  cases  of  such  appoint¬ 
ment,  on  the  refusal  of  any  member  to  serve,  he  shall  pay  a  fine  not  to  exceed  five  nor  less  than  one  dollar. 

Additional  Article,  passed  by  unanimous  vote  on  September  19,  1817,  to  amend  the  Sixteenth  Article, 
viz. :  That  no  person  shall  be  considered  eligible  to  be  balloted  for  as  a  member  unless  such  person  shall 
have  served  an  apprenticeship  to  one  of  the  members  of  the  Board  at  least  two  years  immediately 
preceding  hie  election. 

Proceedings  of  the  Board. 

Saturday,  March  15, 1817. 

Resolved,  That  sales  made  at  this  Board  are  to  be  settled  for  on  the  next  day  succeeding  the  day  of 
sale,  unless  expressed  to  the  contrary. 

Resolved,  That  the  fifty  shares  of  Manufacturing  Bank  sold  by  John  G.  Warren  to  Wm.  G.  Bucknor 
at  68  per  cent.,  on  the  13th  inst.,  be  expunged  from  the  register  of  the  Board,  being  a  fictitious  sale. 

S.  and  M.  Allen  to  be  proposed  by  A.  H.  Lawrence,  to  be  balloted  for  as  members  of  this  Board  on 
Monday  the  17th  inst. 

Monday,  March  17,  1817. 

Result  of  an  election  for  S.  and  M.  Allen  to  become  members  of  this  Board  were:  In  favor,  7; 
against,  17. 

Tuesday,  April  8,  1817. 

Resolved,  That  12  o’clock  be  the  hour  of  meeting  hereafter. 

Resolved,  That  we  pay  Mr.  Geo.  F.  Vaupell  for  the  use  of  his  front  room  in  the  second  story  of  house 
No.  40  Wall  Street,  two  hundred  dollars  ($200)  per  annum,  he  to  furnish  fire  and  chairs,  when  required, 
and  to  keep  the  room  in  order. 

Monday,  April  14, 1817. 

Resolved,  That  in  all  sales  of  Specie  between  Brokers,  the  purchaser  shall  send  for  the  same,  or  pay 
the  expense,  if  any,  when  the  seller  delivers  it. 

Saturday,  April  26, 1817. 

Resolved,  That  any  member  leaving  the  room  during  the  calling  of  the  Stocks  without  leave  of  the 
president,  he  shall  be  subjected  to  a  fine  of  not  less  than  six  nor  more  than  twenty-five  cents,  at  the 
discretion  of  the  President. 

Tuesday,  April  29, 1817. 

Resolved,  That  James  Arden  is  not  competent  for  any  Broker  to  receive  an  order  from. 

Tuesday,  May  6, 1817. 

Resolved,  That  the  members  of  this  Board  be  uncovered  during  the  call  of  Stocks. 

Friday,  June  13, 1817. 

William  B.  B.  Young,  proposed  this  day  by  J  and  J.  Bleecker,  to  be  voted  for  on  the  16th  inst. 

Monday,  June  16, 1817. 

William  B.  B.  Young  balloted  for :  18  white  balls ;  7  black  balls. 

Thursday,  June  26,  1817. 

Resolved,  unanimously,  That  the  President  and  Secretary  be  authorized  to  purchase  a  clock  for  the 
use  of  the  Board,  and  to  pay  for  the  same  from  the  funds  of  the  Board. 

Saturday,  September  20, 1817. 

John  Warren  voted  for  and  unanimously  elected;  25  members  present. 

Saturday,  October  11, 1817. 

Unanimously  adopted— 

Whereas,  It  is  deemed  highly  improper  and  injurious  to  the  interest  of  this  Board  that  its  members 
should  transact  business  without  a  commission  for  Brokers  who  are  not  members  of  this  Institution. 

Therefore,  Resolved,  That  no  member  of  this  Board  shall  either  directly  or  indirectly  make,  or 
cause  to  be  made,  any  purchases  or  sales  whatever,  at  this  Board,  for  any  person  or  persons  acting  as 
Broker  or  Brokers  (who  are  not  members  of  this  Board)  without  receiving  a  full  commission  for  the  same, 
end  for  the  faithful  performance  of  w  hich  we  all  mutually  pledge  our  honor. 


66 


THE  NEW  YORK  STOCK  EXCHANGE 


Thursday,  October  23, 1817. 

Resolved,  That  in  all  time  bargains  the  rate  of  interest  is  understood  to  be  seven  per  cent.,  unless 
qualified  at  the  time  of  making  the  bargain. 

Resolved,  That  in  all  cases  where  any  member  requests  the  President  to  revert  to  a  Stock  already 
called,  he  shall  pay  therefor  25  cents,  and  any  other  member  offering  the  same  Stock  after  such  reversion 


shall  pay  6  cents. 

F  November  1,  1817. 

Resolved,  That  no  offer  under  %  per  cent,  be  accepted  at  this  Board. 

Resolved,  That  half-past  11  be  the  hour  of  meeting  hereafter. 

November  6,  1817. 

Resolved,  That  the  President  and  Secretary  of  this  Board  be  at  all  times  exempt  from  fines  for  non- 
attendance. 

November  10, 1817. 

Resolved,  That  no  member  of  this  Board,  nor  any  partner  of  a  member,  shall  hereafter  give  the  prices 
of  any  kind  of  Stock,  Exchange  or  Specie,  to  any  printer  for  publication,  and  that  the  Secretary  of  the 
Board  only  be  authorized  to  give  the  prices  for  that  purpose. 


November  11, 1817. 

Beers  and  Bunnell  balloted  for ;  26  members  present :  20  white  balls ;  6  black  balls — 26. 

November  29, 1817. 

Resolved,  That  the  Secretary  be  authorized  to  furnish  the  prices  of  stock  but  once  a  week,  to  one 
price  current  only,  at  his  discretion,  and  that  no  other  quotation  be  made  for  publication. 

December  9,  1817. 

The  committee,  to  whom  was  referred  certain  Resolutions  of  the  Board,  beg  leave  to  oSer  for  their 
consideration  the  following  Resolutions : 

Resolved,  That  all  offers  made  and  accepted  shall  be  considered  binding,  whether  called  by  the  Presi¬ 
dent  or  not,  but  where  there  may  be  more  than  one  claimant  the  Stock  may  be  put  up  again  at  the  same 
or  higher  rate,  or  withdrawn,  at  the  option  of  the  person  so  offering. 

Resolved,  That  when  a  person  pays  a  fine  to  go  back  to  a  Stock,  he  shall  have  the  privilege  of  making 
the  first  offer,  buying  or  selling,  after  which  the  Stock  shall  be  considered  on  the  Board. 

December  16, 1817. 

Beers  and  Bunnell  balloted  for;  27  members  present:  26  white  balls;  1  black  ball. 

Respectfully  submitted, 

A.  H.  Lawrence, 

Benjamin  Huntington, 
Frederick  A.  Tracy, 

Passed  unanimously,  December  9,  1817.  Committee. 


It  will  be  noticed  that  the  Board  was  jealous  of  its  privileges.  Only- 
one  new  member  was  admitted  in  1817,  though  several  outside  brokers 
made  ineffectual  efforts  to  get  in.  It  will  also  be  noticed  that 
Renting  of  a  new  regularly  rented  meeting  room  was  in  the  office  of 

meeting  room.  0  u  0 

George  F.  Vaupell,  at  No.  40  Wall  Street.  Presumably 
Mr.  Beebe  had  grown  weary  of  extending  unrequited  hospitality  to  the  new 
organization.  The  transaction  of  business  under  the  rules  set  forth  in  the 
document  afforded  the  best  possible  evidence  as  to  the  form  a  permanent 
constitution  should  take. 

On  February  21,  1820,  a  revised  constitution,  comprising  fifteen 
articles  and  a  set  of  thirteen  by-laws,  was  adopted.  The  name  of 
the  organization  was  continued.  The  following  men  constituted  its 
membership  at  this  time:  G.  S.  Mumford,  Nathaniel  Prime,  A.  H. 
Lawrence,  Samuel  Ward,  Jr.;  W.  H.  Robinson,  Leonard  Bleecker,  Seixas 
Nathan,  Edw^ard  Lyde,  Ben  Huntington,  Philip  Kearny,  Charles  Walton, 


A  NEW  MARKET  AND  THE  FIRST  CONSTITUTION 


67 


John  Ward,  Jr.;  Isaac  G.  Ogden,  William  Lawton,  John  Roe,  John  G. 
Smith,  J ohn  Benson,  Henry  J.  Cammann,  Arthur  N.  Gifford,  Israel  Foote, 
William  Godet  Bucknor,  P.  Lanman,  William  J.  Robinson,  Levi  Coit, 
Russell  H.  Nevins,  Henry  Ward,  Jacob  Isaacs,  F.  A.  Tracy,  Theodore  0. 
Fowler,  John  G.  Warren,  James  W.  Bleecker,  Benjamin  Bush,  Joseph 
Sands,  Bernard  Hart,  J  ohn  H.  De  Forest,  Samuel  J.  Beebe,  J.  D.  Beers,  and 
R.  Bunnell.  Mr.  Mumford,  who  had  succeeded  Mr.  Stockholm  two  years 
before,  continued  as  president,  and  J  ohn  Benson,  who  had  been  secretary 
of  the  Board  from  the  outset,  retained  his  office. 

The  new  regulations  did  not  contain  any  very  vital  innovations.  They 
simply  embodied  those  improvements  which  a  practical 
experience  of  the  old  regime  had  shown  to  be  advisable.  The  Constitution 
existing  schedule  of  commissions,  the  provision  against  Gf  1820. 
fictitious  sales,  and  the  prohibition  of  the  practice  of  executing 
orders  for  outside  brokers  at  reduced  rates,  were  all  continued  in  force. 
The  changes  which  were  introduced  may  be  briefly  outlined. 

The  new  constitution  directed  the  secretary  to  render  a  statement  of 
the  Board’s  finances  at  each  annual  meeting,  on  the  second  Saturday  in 
March,  there  being  no  treasurer,  and  to  keep  a  record  of  the  transactions, 
which  should  be  binding  on  the  members.  Names  of  prospective  new 
members  were  voted  upon  ten  days  after  they  had  been  submitted,  instead 
of  three,  and  an  initiation  fee  of  twenty-five  dollars  was  prescribed.  A 
quorum  was  to  consist  of  a  majority  of  the  Board,  instead  of  two-thirds  as 
theretofore,  but  it  required  the  consent  of  two-thirds  of  all  the  members  to 
alter  the  constitution  or  by-laws.  A  two-thirds  vote  of  those  present  was 
made  necessary  to  reverse  the  ruling  of  the  president  upon  a  point  of  order. 
In  lieu  of  the  rule  prescribing  the  “giving  up”  of  the  names 
of  principals  at  the  time  of  a  contract,  it  was  provided :  “In 
all  time  bargains  the  parties  to  surrender  principals  before 
1  o’clock  p.  m.  of  the  day  of  contract,  and  where  either  party  gives  up 
principal,  the  other  to  be  allowed  until  5  o’clock  p.  m.  of  the  same  day, 
for  consideration.  When  the  principal  on  either  side  is  not  satisfactory 
the  bargain  to  be  void ;  if  no  explanation  takes  place  before  the  time 
specified,  the  parties  are  to  be  considered  bound.”  A  member  who  refused 
to  abide  by  the  constitution  was  to  get  a  hearing,  at  which,  if  he  continued 
recalcitrant,  he  might  be  expelled  from  the  Board  by  the  vote  of  two-thirds 
of  those  present.  Two  of  the  articles  adopted  were  as  follows : 

“Article  Thirteenth. — Any  member  who  fails  to  comply  with  his 
contracts,  or  becomes  insolvent,  shall  be  suspended  until  he  has  settled 
with  his  creditors.  On  his  application  for  re-admission,  a  committee  of 
five  members  shall  be  appointed  to  investigate  his  conduct  and  the  causes 
of  his  failure,  who  shall  report  the  same,  and  if  two-thirds  of  the  members 


68 


THE  NEW  YORK  STOCK  EXCHANGE 


present  are  for  reinstating  him,  he  shall  again  be  entitled  to  his  seat  at 
the  Board,  excepting  when  his  failure  has  been  caused  by  speculations  on 
his  own  account,  or  for  account  of  persons  whose  responsibility  is  merely 
nominal ;  in  that  case  he  shall  no  longer  be  considered  a  member  of  the 
Board  until  such  engagements  are  settled. 

“Article  Fourteenth. — In  all  sales  of  the  local  stocks  of  this  city,  or 
of  the  funded  debt  of  the  United  States  on  the  books  in  this  city,  either 
party  shall  have  the  right  to  require  the  purchase  money  to  be  paid  at  the 
time  and  place  of  transfer.” 


The  by-laws  provided  that  stocks  and  specie  should  not  be  offered  in 
amounts  of  less  than  $500,  “and  doubloons  in  less  number  than  forty.” 
No  offer  was  to  be  permitted  “under  one-quarter  per  cent.,  unless  for 
sums  of  $1,000  and  upward.”  Sales  were  to  be  settled  for,  as  previously, 
on  the  day  after  contract,  and  contracts  falling  due  on 
bylaws  m  the  Sundays  or  bank  holidays  were  to  “be  paid  on  the  preceding 
day.”  The  purchaser  of  specie  was  to  be  put  to  the  trouble 
and  expense  of  sending  for  it.  The  fine  for  leaving  the  room  while  the 
call  of  stocks  was  in  progress,  and  the  fee  for  reverting  to  stocks  after 
they  had  been  regularly  called,  were  each  fixed  at  25  cents.  When  two 
members  claimed  to  have  accepted  either  a  bid  or  an  offer,  the  man 
who  made  it  might  withdraw  it  if  he  chose.  Indecorous  conduct  subjected 
a  member  to  the  danger  of  being  suspended  for  not  less  than  a  week  nor 
more  than  a  month,  by  a  two-thirds  vote  of  those  present,  or  of  being 
expelled  for  a  repetition  of  the  offence.  In  case  of  expulsion  on  this  score, 
the  guilty  man  might  be  re-admitted  by  a  two-thirds  vote  of  those  present. 
The  president  had  the  exclusive  right  to  levy  fines.  For  non-attendance  at 
the  calling  of  stocks,  unless  the  member  in  question  were  sick,  or  out  of 
town,  or  had  been  excused  by  the  president,  a  fine  of  6  cents  was  imposed. 
The  fines  and  fees  were  to  be  applied  to  the  payment  of  the  Board’s 
expenses,  under  the  direction  of  its  officers.  If  these  should  not  suffice,  the 
balance  due  was  to  be  equally  shared  by  the  members.  The  provisions 
incorporated  in  the  rules  of  November  10  and  November  29,  1817,  were 
wholly  omitted.  So  was  the  plan  for  holding  decisions  open  for  three 
successive  days  at  the  request  of  any  three  members.  For  the  refusal  of  an 
a  rule  that  was  °fficer  to  serve,  a  fine  of  from  three  to  four  dollars  might  be 
tried  and  found  imposed.  One  amendment  which  the  Board  adopted,  and 
wanting.  which  they  unanimously  wiped  out  in  September,  1826,  was 

embodied  in  the  sixth  by-law.  It  read  as  follows: 


“In  all  cases  of  default  in  contracts  between  members  of  this  Board,  or 
between  individuals  and  members  of  the  Board,  they  pledge  themselves  to 
protect  each  other  whenever  circumstances  will  admit,  of  which  the  Board 
will  decide.” 


A  NEW  MARKET  AND  THE  FIRST  CONSTITUTION 


69 


This  fraternal  project  was  defined  in  terms  of  too  great  latitude  to  admit 
of  its  being  effective.  There  seems  to  be  no  danger  that  it  will  ever  be  revived. 

Later  the  members  passed  a  resolution  providing  that,  when  stock 
was  delivered  after  2:15  in  the  afternoon  of  the  day  on  which  „Delivery 
it  was  due,  the  buyer  could  postpone  its  acceptance  till  the  hours.” 
following  day  without  incurring  an  interest  charge.  Any  The  custody  of 

the  clock 

member  who  had  the  right  to  call  on  another  for  stock  must 

exercise  it  before  2:15  on  the  proper  day.  The  Board’s  clock  was  to  be  the 

guide,  and  to  John  E.  Hyde  was  entrusted  the  duty  of  taking  charge  of  it. 

The  new  constitution  was  chiefly  the  work  of  a  committee,  appointed 
in  November,  1819,  consisting  of  W.  H.  Robinson,  F.  A.  Tracy,  R.  H. 
Nevins,  Nathaniel  Prime,  and  L.  Loomis.  Strange  to  say,  the  name  of 
Mr.  Loomis  does  not  appear  in  the  list  of  members  in  1820.  It  will  be  noticed 
that  only  three  individual  names — those  of  Leonard  Bleecker,  Bernard 
Hart,  and  A.  H.  Lawrence — which  figured  on  that  list  had  also  been  signed 
to  the  agreement  of  May  17,  1792.  The  Bleecker  family  was  evidently 
prominent  in  the  early  stock  market.  One  of  the  members  of  1820, 
James  W.  Bleecker,  served  for  three  years,  1827,  1828,  and  1829,  as 
president  of  the  Board;  became  its  first  treasurer  in  1833,  and  held  the 
latter  office  from  that  time  until  his  death,  in  1861,  with  the  exception  of 
the  year  1835,  during  which  John  Ward  replaced  him. 

Throughout  his  long  period  of  service  Mr.  Bleecker  seems  to 
have  preserved  such  a  zeal  for  the  Board’s  welfare  as  he 
might  have  been  expected  to  have  for  his  own.  He  was  a  jealous  custo¬ 
dian  of  the  organiza¬ 
tion’s  funds,  and  so 
opposed  to  rash  expen¬ 
ditures  that  in  later 
years  a  favorite  jest  of 
mischievous  members 
was  to  vote  appropria¬ 
tions  to  charity  for  the 
purpose  of  exciting  his 
indignant  wrath. 

As  the  reappearance 
of  the  yellow  fever,  which 
was  a  much  dreaded 
scourge  during  the  early 
part  of  the  last  century  in  New  York,  induced  a  thinning  out  of  the  down¬ 
town  population  in  1819,  the  Board  followed  the  example  of  the  banks  and 
journeyed  to  the  north.  The  institution’s  new  home  was  in  Washington 
Hall,  at  Broadway  and  Reade  Street.  Authentic  data  as  to  the  peregri- 


Mr.  Bleecker’s 
long  service. 


WASHINGTON  HALL,  CORNER  OF  READE  STREET. 


70 


THE  NEW  YORK  STOCK  EXCHANGE 


nations  of  these  early  brokers  are  not  easily  obtained.  The  records 
show  that  they  leased  of  one  Thomas  Franklin  “the  lower  back  room 
.  .  .  in  the  rear  of  the  Protection  Fire  Company”  for  three  months 

from  July  1,  1824,  at  an  aggregate  rental  of  $100.  In  this  year 

Edward  Lyde  succeeded  Mr.  Mumford  as  president  of  the 
Migrations  of  Board,  John  Ward  and  Jacob  Isaacs  being  elected  vice- 

the  Board.  #  4=5 

president  and  secretary,  respectively.  Mr.  Ward  and  Mr. 
Isaacs  each  served  seven  years.  On  March  12,  1825,  a  resolution  was 
passed  authorizing  the  hiring  of  “Mr.  Warren’s  room”  for  two  years, 
“at  a  rent  not  exceeding  $500,  he  to  furnish  it  agreeable  to  the  wishes 
of  the  Board.”  This  domicile  was  occupied  until  May  1,  1827,  when 
the  Board  removed  its  ensign  to  the  second  story  of  the  newly  built 
marble  structure  of  the  Merchants’  Exchange  Company,  at  Wall  and 
Hanover  streets.  These  quarters,  at  $500  a  year,  were  secured,  with 
mutual  concessions  by  lessors  and  lessees.  The  brokers  allowed  the  Cham¬ 
ber  of  Commerce  to  occupy  their  own  room  “after  1  o’clock  p.  m.  on  any 
day,”  and  on  special  occasions  when  practicable. 


It  was  the  custom,  in  the  first 
ence,  for  the  president  to  call  the 
morning.  Business  had  not  yet 
tate  a  long  period  of  bidding  and 
their  bargains  within  a  reason- 
for  the  day.  They  had  reached, 
mutual  understanding  “not  to 
offers,  or  transactions  of  any 
members.”  But,  doubtless, 
the  keen-eyed  speculator  was 

w  bear- 

or  that,  and  it 
punctilious 
would  refuse 
client  what 
as  a  market 
may  readily  i 
M  r .  Bucknor 
bid  up  “Bank 
or  Mr.  Prime 
ted  States 
free  hand,  the 
the  early  twen- 
these  occur- 
their  tavern 


m 


MERCHANTS’  EXCHANGE,  WALE  AND  HANOVER  STREETS. 


few  years  of  the  Board’s  exist- 
stocks  at  11:30  o’clock  each 
grown  so  brisk  as  to  necessi- 
offering.  The  brokers  struck 
ably  brief  time,  and  departed 
as  early  as  January,  1819,  a 
inform  outsiders  of  the  bids, 
particular 
then,  as  now, 
eager  to  know 
ing”  this  stock 
was  a  most 
broker  who 
to  tel1  his 
1  might  serve 

guide.  We 
believe  that  if 
attempted  to 
of  New  York,” 
offered  “Uni- 
sixes”  with  a 
quidnuncs  of 
ties  discussed 
rences  over 
libations. 


THE  CRISIS  OF  1818 


N  the  period  between  the  adoption  of  the  Constitution  of  1817 
and  its  revision,  a  wave  of  commercial  distress  swept  over 
the  restless  people  of  this  country.  It  proved,  no  doubt,  less 
disastrous  to  the  brokers  of  New  York  than  to  the  com¬ 
munity  at  large,  for  the  speculation  which  was  among  its 
concomitants  and,  indeed,  one  of  its  chief  factors,  naturally 
resulted  in  a  fair  amount  of  stock-market  activity  and  a  consequent 
increase  in  brokerage  commissions.  Dealing  in  securities  was,  of  course,  a 
small  part  of  the  speculative  movement  of  the  time.  The  scope  of  that 
movement  virtually  comprised  the  entire  trade  of  the  nation.  The  feverish 
desire  to  take  unsafe  risks  was  not  ended  by  the  ripening  of  its  fruit,  but 
the  ensuing  depression  necessarily  contracted  inflated  credits,  and  in  time 
was  followed  by  a  general  recuperation. 

Attention  has  been  drawn  to  the  remarkable  upspringing  of  new 
business  enterprises  which  marked  the  close  of  the  War  of  1812.  The 
revival  of  industry  and  trade  was  accompanied  by  a  tendency 
to  extravagance  which  may  be  credited  to  the  same  cause — a  Naty>nal  801  f- 
burst  of  national  pride  and  confidence  in  the  country’s  future,  extravagances. 
In  the  present  generation  we  do  not  need  to  be  assured  that 
this  confidence  was  well  founded.  But  the  men  of  Madison’s  day  carried  it 
to  excess.  They  appeared  to  believe  that  they  would  all  grow  rich  in  a 
year.  The  slow  process  of  building  up  a  nation’s  wealth  and  power  was, 
they  reflected,  characteristic  of  the  effete  civilization  of  Europe.  The 
United  States  was  born  beneath  a  kindlier  star,  and  could  show  the  world  a 
new  species  of  prowess.  The  nation  had  just  withstood  the  power  of  Great 
Britain  and  was  already  preparing  to  humble  the  piratical  Dey  of  Algiers. 
Decatur’s  successful  expedition  against  the  African  potentate,  and  the 
rescue  of  American  prisoners  and  ending  of  the  blackmail  we  had  been 


72 


THE  NEW  YORK  STOCK  EXCHANGE 


paying  the  Dey,  took  place  in  June,  1815,  and  stimulated  the  already  high 
spirits  of  America.  Weary  of  the  effects  of  the  long  embargo  upon  our 
commerce,  the  country  was  now  anxious  to  see  the  products  of  other 
nations  in  our  ports.  Europe  was,  of  course,  effete,  but  she  set  the  fashions. 
British  merchants  lost  no  time  in  dumping  the  contents  of  their  warehouses 
upon  our  docks,  and  the  accruing  profit  was  remarkable.  A  cargo  of  salt 
and  earthenware  from  Liverpool  sold  at  an  advance  of  five  hundred  per 
cent,  upon  the  cost  price.  In  a  single  week  British  goods  offered  upon 
the  auction  block  in  New  York,  Philadelphia,  and  Baltimore  brought 
$1,300, 000. 1  The  craze  for  British  products  was  not  only  immensely 
advantageous  to  our  quondam  foes;  it  was  immediately  hurtful  to 
American  merchants  and  eventually  disastrous  to  the  people  at  large. 
With  the  conclusion  of  the  campaign  against  Napoleon,  a  large  number 
of  men  who  had  been  engaged  in  fighting  under  the  British  flag  returned 
to  compete  with  British  laborers,  and  so  cheapened  wages  in  the  “tight 
little  isle.”  In  consequence,  Englishmen  were  able  for  the  time 
a  harvest!^  to  undersell  us  in  our  home  markets,  and  to  retain  their 
trade  with  us  upon  a  profitable  basis,  even  after  the  passing 
of  the  first  craze  for  their  goods. 

Those  manufactures  to  which  American  capital,  dispossessed  from  the 
shipping  industry  by  Jefferson’s  embargo,  had  been  forced  to  resort,  were 
found  in  a  bad  plight  in  the  year  1815,  though  the  general  public  believed 
itself  just  entering  upon  an  era  of  sound  prosperity.  In  the  following  year 
Henry  Brougham — afterward  England’s  Lord  Chancellor — who  had  just 
been  returned  to  the  Commons  from  the  borough  of  Winchelsea,  in  the 
course  of  a  speech  on  the  movement  of  English  goods  toward  the  United 
States  (whose  people  he  contrasted  with  those  of  Continental 
Europe  as  being  “able  to  pay”),  complacently  remarked 
that  the  result  would  be  a  nipping  in  the  bud  of  those  manu¬ 
factures  which  were  arising  in  America  “contrary  to  the 
natural  course  of  things.”  Brougham  was  a  sincere  friend  of 
humanity,  and  it  is  unlikely  that  racial  jealousy  induced  him  to  make  that 
speech.  But  it  excited  considerable  alarm  in  this  country — whose  manu¬ 
facturers  by  no  means  admitted  that  they  were  contravening  “the  natural 
course  of  things”  —  and  it  added  impetus  to  the  already  growing  move¬ 
ment  in  favor  of  a  protective  tariff. 

Congress  had  enacted  a  protective  measure  in  1789,  but  the  duties 
it  imposed  were  small,  and  its  chief  object  and  effect  were  the  raising  of 
revenue.  Prior  to  1789  the  States  had  separately  indulged  in  tariff  legisla¬ 
tion.  Various  laws,  laying  taxes  upon  imports,  were  imposed  in  the  next 
fifteen  years,  and  in  1804  the  tariff  duties  averaged  twenty  per  cent. 

1  History  of  the  People  of  the  United  States:  John  Bach  McMaster.  New  York.  1885. 


Brougham’s 
speech  in  the 
Commons 
arouses  alarm 
in  America. 


THE  CRISIS  OF  1818 


73 


In  1816  a  depleted  national  treasury,  and  the  clamoring  of  panic-stricken 
manufacturers,  urged  Congress,  despite  the  arguments  of  the  leading  econo¬ 
mists  of  the  time,  to  a  new  tariff  law.  This  effort  to  combat  the  headway 
secured  by  British  products,  of  which  the  invasion  in  force  had  succeeded 
the  raising  of  the  long  embargo,  established  a  duty  of  about  twenty  per 
cent,  ad  valorem  on  importations  of  cotton  and  woollen  fabrics,  and 
provided  specific  duties  for  iron.  Its  object  was  to  shut  out  altogether 
competition  in  goods  of  which  a  full  supply  could  be  produced 
at  home.  It  was  expected  that  the  result  of  the  bill  would  be  Tan£f  of  1816' 
not  only  relief  to  the  distress  of  home  industries,  but  the  substitution  for 
the  previous  system  of  taxation — which  was  beyond  doubt  inequitable — 
of  a  new  revenue  amply  sufficient  to  construct  the  roads,  canals,  and 
other  improvements  planned  by  the  Government,  as  well  as  to  pay  its 
running  expenses.  However  our  views  as  to  the  merits  of  protection  may 
vary,  there  certainly  appears  to  have  been  a  great  temptation  in  the  last 
year  of  Madison’s  administration  to  provide  artificial  aid  for  the  manu¬ 
factures  of  the  youthful  country.  It  did  not  then  prove  wholly  effective. 
Neither  the  tariff  nor  the  popular  demand  that  all  Americans  should 
patronize  home  industries,  and  that,  from  the  President  to  the  infantry 
private,  every  man  paid  by  the  National  Treasury  should  wear  no  cloth 
but  that  made  by  the  nation,  sufficed  to  keep  out  competition.  British 
merchants  adopted  ingenious  schemes  to  evade  the  customs  duties,  which 
schemes  were  none  the  less  successful  because  they  were  con¬ 
ceived  in  fraud.  The  British  Government,  furthermore,  took  A  blow  to 

Amoricfliii 

means  to  exclude  our  shipping  from  the  West  Indies.  This  shipping, 
was  a  severe  blow.  American  bottoms  began  to  lay  up  and 
rot  in  the  ports  of  the  Atlantic  seaboard,  and  thousands  of  seamen,  thrown 
out  of  employment,  helped  to  foment  the  public  discontent. 

Such  conditions  were  grave,  and  naturally  became  the  subject  of  loud 
complaint.  But  their  existence  should  not  be  the  excuse  for  exaggeration. 
Of  themselves  they  need  not  have  produced  wholesale  panic  and  disaster. 
They  were  offset  by  advantages  which  the  casual  reader  is  too  apt  to  forget 
in  his  indignation  at  the  vengeance  Great  Britain  seemed  to  visit  upon  the 
American  merchantman  for  the  humiliation  she  had  suffered  at  the  hands  of 
the  American  frigate.  This  country,  with  its  enormous  extent  and  natural 
resources,  its  inspiring  climate,  and  its  energetic  people,  was  not  at  the 
mercy  of  English  trade,  even  if  foreign  aggression  caused 
temporary  trouble.  The  “ sufficient  cause”  of  the  coming  The  real  cause 
cataclysm— to  borrow  a  phrase  from  the  metaphysicians  — 
was  the  mania  for  speculation  which  appeared  to  have  conquered  the 
hitherto  victorious  States,  and  for  which  the  national  inexperience  was 
largely  to  blame.  It  was  because  this  speculation  became  diffused,  like  a 


74 


THE  NEW  YORK  STOCK  EXCHANGE 


subtle  poison,  through  all  the  veins  of  our  trade,  that  the  distemper  came 
speedily  upon  us.  We  cannot  fairly  charge  it  to  extraneous  causes.  In 
the  very  years  when  our  infant  industries  secured  the  help  for  which  they 
clamored,  the  journals  of  Great  Britain  were  lamenting  the  exodus  of  her 
farmers,  drawn  to  the  New  World  by  the  superior  attractions  of  greater 
prosperity  and  greater  opportunity  than  they  could  hope  to  find  at  home. 
One  striking  incident  of  the  times,  wrhich  Professor  McMaster  quotes  from  a 
daily  newspaper  of  the  year  1817,  affords  an  eloquent  commentary  upon 
the  condition  of  our  country  during  this  very  period  of  discontent.  A 
Yorkshireman  who  had  landed  here,  and  was  making  his  way  to  Zanes¬ 
ville,  Ohio,  expressed  his  views  of  America  as  follows : 

“This  be  a  main  queer  country,  for  I  have  asked  the  laboring  folks  all 
along  the  road  how  many  meals  they  eat  in  a  day,  and  they 
Out  of  the  aii  said  three,  and  sometimes  four,  if  they  wanted  them.  We 
Yorkshire  man.  have  but  two  at  home,  and  they  are  scanty  enough.  And 
only  think,  sir,  many  of  these  people  asked  me  to  eat  and 
drink  with  them.  We  can’t  do  so  in  Yorkshire,  sir,  for  we  have  not  enough 
for  ourselves.”1 

It  is  permissible  to  doubt  whether  any  subsequent  British  visitor  has 
delivered  himself  in  a  more  interesting  manner  of  his  impressions  of  this 
country. 


& 


AMES  MONROE  succeeded  Madison,  as  President,  in  1817 — inaugu¬ 
rating  “the  era  of  good  feeling.”  His  tour  of  the  States,  marked  as 
it  was  by  the  most  enthusiastic  expressions  of  popular  welcome, 
appears  in  the  retrospect  of  history  as  a  sort  of  Belshazzar’s  feast.  The 
handwriting  was  indeed  upon  the  wrall.  The  growing  inflation  of  bank  and 
commercial  credits  was  rendering  a  collapse  inevitable.  But  it  was  true 
that  the  nation  seemed  outwardly  prosperous,  for  distress  was  confined  to 
one  or  two  classes,  and  a  period  of  political  peace  accompanied  reviving 
trade.  Monroe’s  election  had  shown  the  Jeffersonian  doctrines  overwhelm¬ 
ingly  in  the  ascendant,  and  controversy  was  virtually  precluded  by  the 
withering  of  the  party  to  which  Washington  and  Hamilton  had  belonged. 
New  York’s  developing  trade  had  stimulated  a  desire  to  safeguard  it,  and 
on  July  4,  1817,  ground  was  broken  at  Rome  for  the  Erie  Canal,  which 
remains  a  monument  to  DeWitt  Clinton’s  forethought  and  vigor.  In  the 
South,  Andrew  Jackson  was  completing  a  far  different  enterprise — the 
subjugation  of  the  insurgent  Creek  nation.  He  incidentally  stirred  up  a 
tempest  of  excitement  by  court-martialling  two  British  subjects,  Alexander 
Arbuthnot  and  Robert  C.  Ambrister,  and  by  hanging  the  one  and  shooting 


1  American  Daily  Advertiser,  July  26,  1817. 


THE  CRISIS  OF  1818 


75 


the  other.  They  had  been  accused  of  intriguing  with  the  Indians  against 
the  Government  of  the  United  States  and  found  guilty,  but  Congress  held 
many  a  hot  debate  over  Jackson’s  action.  The  skirts  of  the  hero  of  New 
Orleans  were  eventually  cleared,  though  not  before  Henry 
Clay,  who  was  then  rising  into  prominence,  had  made  him  a  Jackson  achleTes 
lasting  enemy  by  eloquent  denunciations.  Clay  likened  the  discovers  a  foe. 
execution  of  Arbuthnot  and  Ambrister  to  that  of  the  chival¬ 
rous  Due  d’Enghien,  at  Napoleon’s  hands,  thirteen  years  previous,  and 
Jackson  never  forgave  the  comparison. 

Before  considering  the  crisis  of  1818  it  is  necessary  to  turn  backward  a 
moment  to  the  formation  of  an  institution  that  many  believed  to  have 
precipitated  it — the  second  Bank  of  the  United  States,  the  ruin  of  which 
was  destined  to  be  unwittingly  provoked  by  Clay  and  accomplished  by 
Jackson.  In  1814  the  condition  of  public  finances  had  reached  a  pitiable 
plight,  and  the  Government  had  defaulted  upon  the  interest  on  its  bonds. 
“We  turn  to  the  Treasury,”  said  Mr.  Grosvenor,  a  Federalist  member  from 
New  York,  in  an  address  to  Congress,  “and  there  the  most  appalling  views 
are  presented.  We  find  it  empty,  approaching  bankruptcy.  All  confidence 
in  the  promises  of  the  Government  is  gone,  and  public  credit  has  become  a 
spectre,  haunting  the  place  where  it  once  had  flourished.”  The  conditions 
which  this  representative  described  had  made  their  impression  upon 
Secretary  Dallas  of  the  Treasury,  and  he  recommended  the  establishment 
of  another  national  bank,  with  $50,000,000  capital,  of 
which  one-tenth  should  be  subscribed  in  specie  and  the  SroretgeJaDbank 
balance  in  Government  securities,  it  being  provided  that  the 
bank  should  lend  the  Government  $31,000,000  in  its  own  notes,  and 
should  have  the  right  to  suspend  specie  payment  at  discretion.  Daniel 
Webster  was  then  in  Congress.  He  effectively  exposed  the  weak  points  in 
this  measure,  and  a  bill  adapted  to  his  views  was  passed,  but  President 
Madison  vetoed  it  on  the  ground  that  it  did  not  provide  sufficient  aid  for 
the  Government.  In  his  message  of  December  5,  1815,  however,  the 
Executive  broached,  of  his  own  accord,  the  subject  of  a  national  bank,  and 
Dallas  soon  brought  in  a  new  plan.  He  now  proposed  a 
capitalization  of  $35,000,000,  one-fifth  of  that  stock  to  be  Bank 

subscribed  by  the  Government,  and  the  balance  to  be  taken  united  states, 
by  the  public,  who  might,  for  their  subscriptions,  pay  one- 
fourth  in  coin  and  three-fourths  either  in  coin  or  in  Government  securities. 
Clay,  who  had  opposed  the  renewal  of  the  charter  of  the  first  Bank  of  the 
United  States,  supported  this  bill.  He  justified  his  change  of  ground  by 
pointing  out  that  the  Government,  under  conditions  then  existing,  was 
being  forced  to  accept,  in  the  form  of  taxes,  the  depreciated  notes  of  State 
banks  which  had  suspended  specie  payment.  Webster  denounced  these 


76 


THE  NEW  YORK  STOCK  EXCHANGE 


institutions  as  cheats.  They  had  made  large  sums  by  speculating  in 
Government  securities,  he  declared,  and  could  well  afford  to  redeem  their 
notes  in  specie,  if  they  chose.  This  view  needs  some  qualification,  inasmuch 
as  many  of  the  existing  banks  had  issued  notes  so  vastly  in  excess  of  their 
capitalizations  that  their  resumption  of  specie  payment  would  have  meant 
their  destruction.  Webster  succeeded  in  having  the  pending  bill  amended 
to  provide  for  the  payment  of  deposits,  as  well  as  of  notes  of  the  bank,  in 
specie.  It  passed  both  houses,  and  was  approved  by  the  President  on  April 
10,  1816.  The  Government  paid  its  subscription  by  a  stock  note.  The 
books  were  open  for  the  public  for  a  period  of  twenty  days,  and  of  the 
128,000,000  of  stock  allotted  for  that  purpose,  all  but  $3,000,000  was 
subscribed  for.  Stephen  Girard,  of  Philadelphia,  immediately  took  the 
remainder.  There  were  31,334  shareholders  subscribing  in  Philadelphia, 
where  the  parent  bank  was  established.  In  New  York  City  2,641  persons 
subscribed  for  about  $2,000,000  of  the  stock. 

By  the  provisions  of  the  bill  the  bank  wras  to  pay  the  Government  a 
bonus  of  $1,500,000  within  four  years.  Foreign  shareholders  were  not 
permitted  to  vote.  Branches  could  be  established  at  discretion,  and  the 
bank  soon  had  twenty-five  scattered  through  various  parts  of  the  country. 
Presently  the  awakening  stock  market  of  this  city  received  a  fresh 
impetus  from  the  speculation  that  immediately  centred  about  the  shares  of 
this  institution.  The  subscriptions  were  payable  as  follows : 
Speculation  Thirty  per  cent,  down,  thirty-five  per  cent,  at  the  end  of 

bank’s  shares,  six  months,  and  thirty-five  per  cent,  at  the  end  of  a  year. 

Mindful  of  the  desires  of  their  fellow  citizens,  the  considerate 
directors  permitted  transfers  of  the  stock  after  the  first  payments,  and 
even  consented  to  discount  the  notes  of  subscribers,  upon  the  pledge  of 
their  shares,  to  the  amount  of  $8,000,000.  Within  a  short  time  the  lax 
administration  of  the  bank’s  affairs  brought  it  to  the  brink  of  ruin.  The 
president  and  cashier  of  the  Baltimore  branch  borrowed  nearly  $2,000,000 
on  their  own  holdings,  and  then  helped  themselves  to  an  enormous  sum 
without  the  formality  of  giving  collateral.  Their  action  caused  a  loss 
of  $1,671, 224.87. 1  Only  the  Government  deposits  prevented  the  bank’s 
failure.  The  entrance  of  Langdon  Cheves  upon  its  presidency,  in  March, 
1819,  marked  a  return  to  sounder  principles.  He  managed  to  borrow 
$2,500,000  in  Europe,  and  effected  a  needed  reform  by  insisting  that 
loans  made  upon  the  bank’s  shares  should  be  repaid  at  the  rate  of  five  per 
cent,  of  their  respective  amounts  every  two  months. 

Meanwhile  such  criminal  blunders  as  those  which  have  been  noted  had 
precipitated  disaster.  Reference  has  been  made,  in  a  preceding  chapter,  to 
the  outrages  freely  committed  by  the  banks  of  the  time.  In  1818  there 

1  Money  and  Banking  :  Horace  White.  Boston.  1895. 


THE  CRISIS  OF  1818 


77 


were  392  banks  in  this  country:  New  Hampshire  had  twelve,  Vermont 
five,  Massachusetts  thirty-eight,  Rhode  Island  thirty-five,  Connecticut  ten. 
New  York  forty-two,  New  Jersey  fourteen,  Pennsylvania  fifty- 
Bants  of  1818.  njne^  Deiaware  eight,  Maryland  twenty-five,  Virginia  seven¬ 
teen,  North  Carolina  seven,  South  Carolina  three,  Georgia  three,  Ohio 
twenty-eight,  Indiana  three,  Kentucky — where  speculation  had  fairly  gone 
mad — was  supporting  fifty-nine,  Tennessee  three,  Louisiana  three,  Michigan 
one,  Missouri  two,  and  the  District  of  Columbia  fifteen.  Gross  favoritism, 
oppression,  recklessness,  and  corruption  characterized  the  management  of 
the  bulk  of  them.  “Hardly  a  fraud  of  any  kind  could  be  mentioned,” 
says  Professor  McMaster,  “of  which  the  banks  had  not  been  guilty.” 
Their  willingness  to  shoulder  frightful  risks  was  matched  by  a  popular 
eagerness  to  take  advantage  of  their  folly.  With  the  winds  of  foreign 
trade  aggression  already  driving  its  clouds  across  the  horizon,  the  in¬ 
fatuated  public  spread  every  sail  and  disdained  to  see  the  approaching 
whitecaps. 


Advent  of  panic. 


HjlLLIAM  H.  CRAWFORD,  a  Southern  statesman  and  financier  of 
capacity,  had  succeeded  to  the  Treasury  portfolio,  and  had  taken 
measures  to  induce  the  banks  of  New  York  and  Philadelphia,  as 
well  as  certain  others,  to  resume  specie  payments.  It  was,  however,  too 
late  to  ward  off  Nemesis.  The  Government  bank  adopted 
the  policy— a  step  necessary  to  its  own  preservation— of 
compelling  the  State  banks,  whose  notes  it  received  as  deposits,  to  redeem 
them  in  specie.  This  helped  to  bring  to  head  the  eruptions  upon  the  body 
of  the  public  finances.  Credits  were  contracted,  and  the  inflation,  started 
by  the  superficial  prosperity  which  followed  the  Treaty  of  Ghent,  collapsed, 
with  sickening  rapidity,  in  the  turmoil  of  1818.  Individuals  and  corpora¬ 
tions  plunged  into  bankruptcy.  The  weaker  banks  themselves  tottered 
for  a  moment  before  the  blast,  and  then  descended  into  the  ruin  they  had 
prepared.  The  misfortunes  of  the  manufacturer  and  the  shipper  spread 
to  the  people  at  large  with  a  speed  paralleling  that  of  the  plague  which 
followed  the  footsteps  of  the  Wandering  Jew.  With  the  destruction  of  great 
enterprises  and  the  starvation  of  workingmen,  with  the  shrivelling  of  the 
promoter  and  the  eviction  of  the  penniless  clerk,  with  the  punishment  of 
the  guilty  and  the  destruction  of  the  innocent,  the  sanguine  country  paid 
the  price  of  its  speculative  debauch. 

The  period  of  acute  distress  lasted  through  1819.  In  that  year,  in  the 
city  of  Philadelphia,  out  of  9,672  workmen  who  had  been  An  illustration 
earning  their  bread  three  years  previously  in  thirty  branches  of  disaster, 
of  industry,  7,500  had  been  thrown  out  of  employment.  Other  commu- 


78 


THE  NEW  YORK  STOCK  EXCHANGE 


nities  suffered  in  much  the  same  fashion.  The  cataclysm  was  general  and 
complete.  It  was  also  inevitable,  in  view  of  the  course  of  which  it  became 
the  apogee.  As  may  always  be  expected  in  a  panic,  the  shaking  out  of 
fallacious  credits  brought  the  country  to  a  sounder  basis.  Most  of  the 
banks  which  had  gone  to  the  wall  were  no  loss  in  themselves.  Slowly  and 
painfully  the  nation  began  to  work  itself  up  out  of  the  mire.  The  climate, 
the  soil,  and  the  future  were  still  at  its  command.  It  profited,  of  course,  by 
its  bitter  experience,  and  within  a  reasonable  time  its  marvellous  inherent 
vitality  had  begun  to  recoup  the  losses  of  its  first  commercial  panic  as  it 
had  wiped  out  those  due  to  the  ravages  of  war  and  of  currency  blunders. 
So  far  as  the  banking  evil  went,  that  could  not  be  annihilated  in  a  day  or  a 
year.  It  was  gradually  lessened,  after  one  disaster  had  followed  another, 
through  remedial  State  legislation  and  a  growing  public  appreciation  of 
sound  financial  principles.  This  process  need  not  be  traced  in  detail.  It 
is  sufficient  to  say  that  it  had  accomplished  much  before  the  advent  of 
the  Civil  War. 

An  immediate  result  of  the  distress  of  1818  and  1819  was  a  popular 
indignation  against  the  Bank  of  the  United  States,  which  had  been  rash 
enough  to  insist  upon  the  redemption  by  the  State  banks  of 
their  promises.  Especially  in  Georgia,  Kentucky,  and  Ohio, 
the  public  wrath  grew  hot.  All  manner  of  vicious  legislation, 
usually  calculated  to  help  fraudulent  debtors,  made  its 
The  States  attempted  to  force  out  the  branches  of  the 
Government  bank  by  taxation,  and  when  the  Supreme  Court  decided  such 
taxation  to  be  unconstitutional,  in  the  McCulloch  case,  Ohio  saw  fit  to  defy 
it  and  to  disgrace  itself  by  enacting  laws  which  made  the  bank  an  outlaw 
in  that  State,  and  offered  immunity  to  any  one  who  should  commit  a  crime 
against  it. 


Public  wrath 
visited  upon  the 
Bank  of  the 
United  States. 

appearance. 


HORT  selling,  as  defined  by  Wall  Street,  consists  of :  (1)  The  putting 
out  of  contracts  for  the  delivery  of  unpossessed  securities  at  a 
certain  price  within  a  stated  period,  and  at  a  date  optional  with 
the  seller  or  buyer,  as  the  case  may  be ;  or  (2)  The  marketing  of  borrowed 
securities  in  the  hope  of  buying  back  their  equivalents  at  a  depressed  price. 
The  method  first  named  —  and  still  considered  the  more  “legitimate”  by 
conservative,  old-fashioned  dealers — prevailed  until  recent  years;  that  is, 
before  “deliveries”  began  to  be  made  preferentially  by  “power  and 
certificate.”  “Going  short”  was  naturally  the  most  favorable  mode  of 
stock  speculation  in  the  panic  period  which  has  been  the  subject  of  discus¬ 
sion.  It  had  been  prohibited  by  law  in  this  State,  but  there  is  no  reason 
to  believe  that  the  prohibition  was  effective.  In  1812  the  New  York 


THE  CRISIS  OF  1818 


79 


Legislature  passed  an  act  which,  as  it  figures  in  the  Revised  Statutes  of 
1830  in  a  modified  shape,  makes  this  provision:  “All  contracts  for  the 
sale  of  stocks  are  void,  unless  the  party  contracting  to  sell  Legislation 
the  same  shall,  at  the  time  of  making  such  contracts,  be  in  against 

the  actual  possession  of  the  certificates  of  such  shares,  or  8ellmg  short- 

be  otherwise  entitled  thereto,  in  his  own  right,  or  be  duly  authorized,  by 
some  person  so  entitled,  to  sell  the  certificates  or  shares  so  contracted  for.” 
This  measure  had  a  precedent  in  the  bill  which  the  British  Parliament  had 
enacted  in  1733,  which  prohibited  bargains  for  “puts”  or  “refusals”  in 
stock,  short  selling,  and  “the  evil  practice  of  compounding  for  differences.” 
This  English  law  wras  constantly  defied.  Before  its  repeal,  in  1860,  Charles 
Daguid,  the  historian  of  the  London  Stock  Exchange,  tells  us  its  force 
was  “whittled  away  by  judgment  after  judgment  in  the  law  courts.”  The 
American  prohibition  of  short  selling  seems  to  have  been  a  dead  letter  from 
the  outset.  Had  this  not  been  the  case,  it  is  unlikely  that  the  New  York 
Stock  and  Exchange  Board  would  have  found  its  business  so  expanded 
in  the  panic  times  of  1819  as  to  require  the  adoption  of  a  short  sales 
new  constitution  and  a  formal  set  of  by-lawrs,  and  to  vindicate  made  legal  in 
its  dignity  by  establishing,  as  it  did,  an  initiation  fee  of  $100.  1858- 

In  1858  the  measure  intended  to  cripple  the  energy  of  the  Stock  Exchange 
bear  was  repealed,  and  short  selling  put  under  the  law’s  protection,  by  an 
act  reading  as  follows : 

“No  contract,  written  or  verbal,  hereafter  made  for  the  purchase,  sale, 
transfer,  or  delivery  of  any  certificate  or  other  evidence  of  debt,  due  by 
or  from  the  United  States,  or  any  separate  State,  or  of  any  share  or 
interest  in  the  stock  of  any  bank,  or  of  any  company  incorporated  under 
any  law  of  the  United  States,  or  of  any  individual  State,  shall  be  void 
or  voidable  for  any  want  of  consideration,  or  because  of  the  non-payment 
of  any  consideration,  or  because  the  vendor  at  the  time  of  making  such 
contract  is  not  the  owner  or  possessor  of  the  certificate  or  certificates,  or 
other  evidence  of  such  debt,  share,  or  interest.” 


RESPITE  the  hard  lessons  taught  the  country  by  the  distress  of  1818 
and  1819,  the  recuperation  of  the  people  was  marked  by  a  gradual 
J  tendency  to  work  up  again  the  inflated  credit  which  had  proved 
conducive  to  panic.  If  we  wonder  at  the  evanescent  impression  made  by 
the  disaster,  and  condemn  the  folly  of  our  forebears,  we  shall, 
at  all  events,  find  cause  for  honest  admiration  in  the  pluck 
with  which  they  once  more  wrent  to  work.  American  manu¬ 
factures  and  industry  made  distinct  and  remarkable  progress  in  the  decade 
succeeding  the  great  commercial  depression.  Steel  squares  were  first  made 
at  North  Bennington,  Vermont,  in  1820,  and  Newark,  New  Jersey,  started 


Rise  of  new 
manufactures. 


80 


THE  NEW  YORK  STOCK  EXCHANGE 


our  production  of  patent  leather  in  1822.  In  the  following  year  the  wine 
industry  of  Cincinnati  was  founded,  and  in  1824  the  manufacture  of  flannel 
by  machinery  was  started  at  Amesbury,  Massachusetts.  The  making  of 
common  yellow  and  white  dishes  at  Philadelphia;  of  earthenware,  sewer 
pipes,  roof  and  drainage  tiles  at  Baltimore ;  of  axes,  chisels,  and  edged  tools 
at  Hartford,  Connecticut;  of  gas  from  coal  in  New  York — with  the  con¬ 
sequent  relegation  of  whale  oil  to  the  memories  of  colonial  discomfort; 
of  varnish,  straw  paper,  figured  muslin,  calico  prints,  cutlery,  sewing  silk, 
fire  brick,  and  linens,  sprang  into  prominence.  Fire-grates  came  into  use. 
The  anthracite  coal  which  had  been  burned  by  Jude  Obadiah  Gore  as  early 
as  1768,  and  a  bed  of  which  Gunther  had  stumbled  across  a  quarter  of  a 
century  later,  while  hunting  deer  in  Carbon  County,  Pennsylvania,  now 
found  wide  favor  wTith  the  public.  The  hardy  plant  of  Ameri- 
patentB8  °f  can  inventive  genius  was  opening  fresh  leaves  in  the  warmth 
of  each  succeeding  sun.  Between  1825  and  1830,  though  the 
Patent  Office  had  not  yet  been  formally  organized,  more  than  four  hundred 
patents  were  granted  annually. 

Meanwhile  the  fresh  host  of  wool  manufacturers,  called  into  being  by 
the  tariff  of  1816,  were  tasting  the  old  bitterness  of  British  aggression. 
The  enterprising  sons  of  St.  George  did  not  scruple  to  buy  up,  so  far  as 
was  possible,  the  merino  sheep  which  had  been  imported  to  this  country ; 
and  coincidentally  the  expert  wielders  of  the  shears,  who  had  preferred  the 
free  atmosphere  of  the  States  to  that  of  the  “tight  little  isle,”  were  induced, 
by  private  bounties,  to  return  to  the  Old  World.  Great  Britain  was  not 
only  continuing  to  evade  the  customs  laws,  but  was  injuring  our  home 
markets  through  the  auction  system,  sacrificing  prices  in  the  hope  of 
forcing  American  competitors  to  the  wall.  The  extent  of  this 
Extent  of  the  system  may  be  realized  when  we  recollect  that  in  the  year 
1818  foreign  goods  to  the  amount  of  $14,000,000  were  sold 
in  New  York  City  alone.  The  clamor  which  these  conditions  awToke  stimu¬ 
lated  Congress  to  a  fresh  tinkering  with  the  tariff,  in  1820.  Duties  in 
general  were  raised  from  seven  and  a  half  to  ten  or  twelve  and  a  half  per 
cent.,  and  from  twenty  to  twenty-five.  The  tariff  on  wool  was  increased 
eight,  and  that  on  Indian  silks  fifty,  per  cent.,  and  an  additional  duty 
of  $20  a  ton  was  imposed  upon  imports  of  iron.  The  South  at  this 
time  was  disposed  to  favor  protection,  with  a  view  to  preventing  the 
failure  of  its  banks.  A  considerable  amount  of  cheap  Indian  cloths  was 
being  purchased  by  the  slave  holders,  and  this  was  resulting  in  an  unde¬ 
sirable  drain  of  Southern  specie,  inasmuch  as  we  were  not  sending  exports 
to  India ;  and,  therefore,  we  were  paying  her  in  coin  instead  of  in  products. 

Another  increase  in  the  tariff  took  place  in  1824,  the  duties  being 
raised  to  an  average  of  thirty-seven  per  cent.  There  was  no  little  outcry 


THE  CRISIS  OF  1818 


81 


at  the  time,  based  upon  the  allegation  of  commercial  distress ;  but  those 
who  gave  testimony  of  it  to  Congress  are  not  quite  clear  of  the  charge  of 
being  special  pleaders.  Webster  openly  denied  the  existence  of  hard  times, 
and  opposed  the  increase,  in  a  speech  marked  by  extraordinary  acumen. 
He  pointed  out  that  iron  could  be  imported  from  Stockholm  to  Philadel¬ 
phia  at  a  cost  of  $8  a  ton,  which  was  equivalent  to  the  freight  charges 
between  Philadelphia  and  an  American  furnace  fifty  miles  away  from  it. 
Swedish  labor  cost  seven  cents  a  day,  while  American  workingmen  were 
paid  five  or  six  times  that  amount.  He  argued  that  it  was  folly,  in  view 
of  these  conditions,  to  foster  home  competition  with  Swedish  iron,  by 
taxing  the  consumer,  when  the  American  labor  which  was  thus  employed 
could  reap  its  natural  large  return  by  becoming  diverted  into  more  profit¬ 
able  channels  of  industry.  Congress  deferred  to  its  constituents  and 
refused  to  accept  Webster’s  view.  In  1828  the  “tariff  of  abominations,” 
which  increased  the  duties  on  iron,  hemp,  flax,  and  molasses,  was  enacted 
after  six  weeks  of  fierce  debate.  The  South  had  changed  its  front,  and 
bitterly  condemned  this  measure.  It  served,  beyond  a  doubt,  to  scatter, 
somewhat  wider,  the  seeds  of  sectional  antagonism.  The 


effect  of  their  sowing  was  to  become  more  evident  than  ever 


The  seeds  of 
sectional  hate. 


under  the  first  Jackson  administration.  The  country  mean¬ 
while  had  lost  two  of  its  most  famous  sons.  Jefferson  and  John  Adams 
passed  away  on  July  4,  1826,  exactly  half  a  century  after  the  day  on 
which  both  affixed  their  signatures  to  the  Declaration  of  Independence. 1 


H-jUR  foreign  relations  had  been  working  into  more  satisfactory  shape 
I  since  the  War  of  1812.  The  northern  boundary  of  the  States  was 
defined,  in  1818,  by  a  treaty  with  Great  Britain,  under  which 
she  likewise  relinquished  the  privilege  of  navigating  the  Mississippi.  We 
ceded  Texas,  upon  which  we  had  a  most  imperfect  claim,  to 
Spain,  and  obtained  Florida  in  exchange,  paying,  to  bind  the 
bargain,  the  sum  of  $5,000,000,  which  offset  the  spoliation  cession  of  Texas, 
claims  against  us.  Some  slight  apprehension  was  excited 
in  this  country,  however,  by  the  attitude  of  the  Czar,  who  had  obtained 
a  foothold  on  the  northwest  coast  of  this  continent,  and  complacently 
regarded  the  tendency  of  Russian  traders  to  push  his  frontier  to  the  South. 

3In  the  New  Year’s  Address  of  the  Carriers  of  the  Evening  Post  to  Their  Patrons,  printed  on 
January  3, 1827,  appeared  these  lines: 

“To  tire  you  is  not  my  intention,  but  Pve  a  few  things  yet  to  mention — 

How  two  great  men,  their  country’s  pride,  both  on  their  country’s  birthday  died. 

How  many  eulogies  were  said,  and  printed,  too,  about  the  dead, 

All  good,  extremely  good,  indeed,  but  terrible  sad  trash  to  read. 

How  carries  old  Vermont  the  farce  on,  her  Captain-General  a  parson, 

For  Rogers  how  each  patriot  blushes;  how  childish  Secretary  Rush  is, 

And  how  securely  set  his  face  is  ’gainst  English  cloth  and  English  phrases.” 


82 


THE  NEW  YORK  STOCK  EXCHANGE 


The  Holy  Alliance — the  union  of  Russia,  Prussia,  and  Austria,  engendered 
of  the  fears  that  the  common  people  might  demand  too  large  a  share  of 
their  rights,  since  the  amazing  career  of  Napoleon  had  shaken  ancient 
theories  to  their  roots — had  come  into  being.  The  benevolent  despots  of 
the  Old  World  desired  to  crush  the  rising  republics  of  South  America  in  the 
interest  of  order,  humanity,  and  the  divine  right  of  monarchs.  Canning, 
the  British  premier,  suggested  to  our  Minister  at  St.  James’s,  Richard  Rush, 
that  the  United  States  should  take  a  firm  stand  against  the  intrusion  of 
Europe  into  the  affairs  of  the  Western  Hemisphere,  lest  we  become  involved 
in  the  entangling  alliances  we  had  aimed  to  avoid  since  Washington  defined 
our  policy  and  Jefferson  reinforced  his  view.  President  Monroe  thought 
well  of  the  idea.  In  his  annual  message,  on  December  2, 1823,  he  laid  down 
the  doctrine  that  has  since  borne  his  name.  The  young  Republic  boldly 
announced  to  the  world  that  it  would  not  permit  any  further  colonization 

of  this  hemisphere  by  Europe.  The  lightning  accepted  in 
The  promuiga-  meekness  the  defiance  of  Aiax,  and  the  American  people  have 
Monroe  Doctrine,  since  invested  the  doctrine  with  an  almost  sacred  character. 

John  Quincy  Adams  is  understood  to  have  written  the  lan¬ 
guage  in  which  it  was  embodied,  but  Monroe  made  the  decision,  and  Monroe 
deserves  the  credit. 

Slavery  was  rapidly  becoming  an  issue  of  the  highest  importance.  The 
South  regarded  the  right  to  maintain  it  as  a  concomitant  of  State 
sovereignty.  The  North,  which  had  first  imported  slaves,  and  now  had  no 
particular  use  for  them,  was  clearly  able  to  see  the  iniquity  of  the  institu¬ 
tion.  The  bill  constituting  Missouri  as  a  slave  State  wras  passed  in  1820, 
the  famous  compromise  being  arranged  by  which  she  agreed  not  to  exclude 
free  persons  of  color,  and  by  which  slavery  was  forever  prohibited  in  the 
district  west  of  the  Missouri  and  north  of  latitude  36°  30'.  Such  excitement 

ruled  at  the  time  that  Northerners  who  voted  for  the  com- 
Missoun  com-  promise  measure  were  burned  in  effigy  by  their  constituents. 

promise.  0  * 

In  the  presidential  election  of  1820,  which  resulted  in  Monroe’s 
second  term,  Missouri  voted,  but  her  vote  was  not  counted.  She  was  pro¬ 
claimed  a  State  by  the  President,  in  August,  1821.  New  York  having 
passed  Virginia,  now  held  the  front  rank  among  the  States  by  the  measure 
of  population.  As  the  leading  State  in  the  North,  her  zeal  for  the  abolition 
of  slavery  was  no  doubt  as  prominent  as  it  should  be ;  but  those  who  study 
to-day  the  conditions  existing  at  the  time  when  the  slavery  question  was 
first  stirring  up  bad  blood  find  it  hard  to  acquit  the  State  of  hypocrisy,  or, 
at  least,  of  glaring  inconsistency.  No  enlightened  man  of  our  generation 
can  question  the  inherent  criminality  of  slavery,  or  the  gross  immorality 
and  brutality  which  it  fostered.  Few  will  deny  its  ill  effects  upon  the 
slave-holders.  But  it  would  have  behooved  those  who  denounced  it  on  the 


THE  CRISIS  OF  1818 


83 


score  of  humanity  to  bear  in  mind  the  condition  of  their  own  prisons  in 
the  North.  The  jail  system  of  the  day  was  nothing  short  of  an  infamy, 
and  New  York’s  was  a  noted  example  of  what  a  civilized  community  can 
contrive  in  the  name  of  law  and  order.  The  women’s  section  of  the 
debtors’  prison  in  this  city — where  old  and  young,  black 
and  white,  the  outcasts  of  the  streets,  and  the  girl  accused  of  ^nso°  hff  m 
a  petty  misdemeanor,  the  veteran  sneak  thief,  and  the  innocent 
woman  held  as  a  witness,  slept  together  on  one  bare  floor  and  scooped 
their  mush  and  molasses  from  a  single  tub,  while  one  of  their  number  dis¬ 
charged,  with  a  whip,  the  duty  of  preserving  order — surely  presented  a 
picture  as  wretched  as  any  the  abolitionist  could  draw  of  plantation 
conditions  in  the  South. 

The  free  blacks  in  this  country  were  also  a  problem  at  the  time  under 
discussion.  The  public  was  anxious  to  get  rid  of  them,  and  the  result  was 
the  founding,  in  1821,  of  the  African  Colony  of  Liberia. 


VI 

AN  ERA  OF  EXPANSION  AND  STRIFE 

N  the  decade  that  ended  with  the  year  1840  there  were  two 
features  of  national  life  so  peculiarly  dominant  that  they 
take  rank  as  the  characteristics  of  this  period.  The  one 
was  co-extensive  with  the  decade  itself,  the  other  virtually 
culminated  in  the  panic  of  1837,  though  some  glimmerings 
of  the  fierce  light  in  which  it  had  shone  were  to  be  discerned 
even  four  years  later.  These  features  were  the  development  of  the  Ameri¬ 
can  railroad  system,  and  the  working  out  of  the  financial  policy  of  Andrew 
Jackson,  chiefly  exemplified  in  his  overthrow  of  the  second  Bank  of  the 
United  States. 

It  requires  no  inspiration  to  see  at  a  glance  the  intimate  connection  of 
these  events  with  the  life  of  the  Stock  Exchange.  The  market  for  securities 
indicates  the  country’s  progress  or  retrogression,  its  commercial  health  or 
illness,  with  undisputed  accuracy  in  the  long  run.  The  manipulation  of  the 
street,  or  the  warlike  message  of  a  President  to  Congress,  may  cause  the 
needle  to  oscillate,  but  it  tends  constantly  to  point  the  right  course  and  to 
prove  the  compass,  on  the  whole,  reliable.  This  does  not  imply  that  a  rising 
market  always  means  rising  prosperity.  It  may  be  the  effect  of  speculative 
frenzy  destined  to  result  in  a  crash,  but  in  any  event  it  can  be  traced— 
when  it  is  more  than  a  sporadic  movement — to  a  definite  condition  of 
trade  rather  than  to  the  activity  on  ’Change  of  professional  speculators. 

Railroad  growth  enlarged  the  trading  list  considerably,  and  paved  the 
way  for  striking  speculative  careers  like  that  of  Jacob  Little.  It  will  be  of 
interest  to  indicate  just  how  comprehensive  a  stock  market  New  York 
enjoyed  in  the  period  shortly  before  the  railroads  came.  So  far  back  as 
January,  1827,  the  Stock  Exchange  list  included  eight  issues  of  Govern¬ 
ment,  State,  or  city  bonds,  twelve  bank  stocks,  nineteen  marine  or  fire 
insurance  stocks,  American  gold,  doubloons,  and  stock  of  the  Delaware  & 


AN  ERA  OF  EXPANSION  AND  STRIFE 


85 


Hudson  Canal  Company,  the  New  York  Gas  Light  Company — which  had 
been  incorporated  in  1823  —  and  the  Merchants’  Exchange.  On  January 
25,  1830,  the  record  of  the  day’s  business  was  as  follows : 


Stock. 

No.  Shares 
Sold. 

Price. 

United  States  Bank,  .... 

31 

117% 

Merchants’  Bank, . 

10 

98% 

Delaware  &  Hudson  Canal  Company, 

50 

87% 

66  66  u 

25 

87% 

Ocean  Insurance  Company,  . 

20 

151 

Union  Insurance  Company, 

10 

103% 

a  u 

m  •  • 

40 

104 

Franklin  Insurance  Company, 

24 

102% 

Fireman’s  Insurance  Company, 

35 

98 

New  York  Gas  Light  Company, 

50 

101 

New  York  &  Schuylkill  Coal  Company, 

80 

102 

66  66  66 

10 

102% 

66  66  66 

20 

102% 

66  66  66 

20 

103 

66  66  66 

20 

103% 

66  66  66 

20 

104 

This  was  a  total  trading  of  465  shares.  At  times  the  aggregate  fell 
much  lower.  Judging  from  the  records  obtainable,  it  appears  Thirty-one  shares 
that  the  dullest  day  in  the  history  of  the  Stock  Exchange  was  a  day’8  business. 
Tuesday,  March  16,  1830,  when  only  thirty-one  shares  changed  hands. 
Here  is  the  list  of  transactions  for  that  day : 

Stock.  Pwcf, 

United  States  Bank,  . 26  119 

Morris  Canal  &  Banking  Company, .  5  75% 

It  took  just  $3,470.25  to  buy  all  the  stock  sold  on  that  day.  The 
market  broadened  and  prices  rose  with  the  advent  of  railroad  securities 
and  the  spread  of  the  speculative  fever  among  the  public. 

Although  the  growth  of  the  railroads  and  Jackson’s  activity  in  finan¬ 
cial  affairs  maybe  approached  from  a  common  point  of  view — the  recur¬ 
ring  credit  inflation  which  aided  the  first  and  gave  a  deadly  effect  to  the 
second — it  will  be  found  convenient  to  analyze  them  separately.  Reference 
has  been  made  to  the  decade  ending  with  1840  as  the  period  of  the  rise 
of  our  modern  railroad  system.  Rail  tramways  were  in  use,  however, 
before  1830.  The  primitive  locomotive  was  known  in  the 
latter  part  of  the  eighteenth  century,  when  Oliver  Evans,  of 
Philadelphia,  got  out  a  patent  for  a  steam  carriage  which, 
like  the  modern  automobile,  ran  without  the  aid  of  rails.  In 
1826  the  first  American  railroad  was  constructed  from  the  granite  quarries 
of  Quincy,  Massachusetts,  to  the  seaboard,  a  distance  of  three  or  four 


First  steam 
carriage  and 
first  American 
railroad. 


86 


THE  NEW  YORK  STOCK  EXCHANGE 


Trial  of  the 
Stourbridge 
Lion. 


miles,  and  was  operated  by  horse  power.  The  previous  year  had  seen  the 
completion  of  the  Erie  Canal.  It  had  also  seen  George  Stephenson — whose 
genius  virtually  produced  the  modern  locomotive — drive  an  engine,  to 
which  a  train  of  thirty-four  cars  was  attached,  over  the  newly  constructed 
Stockton  &  Darlington  Railroad,  the  first  of  its  kind  in  England.  Signal¬ 
men  on  horseback  preceded  this  formidable  new  machine  of  transportation, 
and  at  favorable  places  the  staring  yokels  and  frightened  cattle  observed 
it  move  at  a  speed  of  fifteen  miles  an  hour.  In  1829  the  Liverpool  & 
Manchester  Railroad  was  opened,  with  Stephenson’s  famous  “Rocket” 
as  its  first  locomotive.  The  inventor’s  great  work  had  proved  a  success. 
The  minds  of  his  own  countrymen  had  scarcely  awakened  to  the  fact  when 
the  keen-eyed  masters  of  American  finance  were  already  preparing  to  use 
his  achievement  for  the  exploitation  of  American  resources. 

On  August  8, 1829,  the  Stourbridge  Lion — the  first  locomotive  to  be 
placed  on  American  rails — which  had  been  constructed  in  England  under 
the  supervision  of  Horatio  Allen,  the  engineer  of  the  Delaware  &  Hudson 
Canal  Company,  made  a  trial  trip  over  the  Carbondale  &  Honesdale 
Railroad,  in  Pennsylvania.  The  track  had  been  completed 
in  1828,  and  was  about  sixteen  miles  long.  Allen  himself  was 
at  the  throttle.  The  Baltimore  &  Ohio  Railroad  Company, 
which  had  an  original  capital  of  $500,000,  was,  meanwhile,  at 
work  in  building  a  road  from  Baltimore  to  Ellicott’s  Mills,  a  distance  of 
some  thirteen  miles ;  construction  had  been  started  in  1828,  and  on  May 
22,  1830,  the  road  was  opened  for  traffic.  This  was  the  pioneer  among  the 
railroads  built  as  common  carriers,  the  Quincy  and  the  Carbondale  & 
Honesdale  each  having  been  constructed  for  the  purposes  of  a  specific 
industry.  Its  rails  were  of  wood,  capped  with  iron  strips,  which  occa¬ 
sionally  burst  their  bonds,  flew  up  and  punctured  the  floors  of  the  carriages, 
and  now  and  then  the  persons  of  the  unsuspecting  patrons  of  the  road. 
The  main  stem  of  the  line,  running  from  Baltimore  to  Wheeling,  West 
Virginia,  a  distance  of  three  hundred  and  eighty  miles,  was  completed  in 
1853.  Until  1832  the  carriages  were  drawn  by  horses,  but  in  1830  the 
first  regular  locomotive  built  in  this  country,  and  the  first  one 
the  Tom  Thumb.  ever  usec*  transport  passengers  m  America,  drew  an  open 
car,  filled  with  directors  of  the  Baltimore  &  Ohio  and  their 
friends,  from  Baltimore  to  Ellicott’s  Mills  at  a  speed  that  occasionally 
reached  eighteen  miles  an  hour.  This  doughty  engine,  which  scarcely 
weighed  a  ton,  was  the  “Tom  Thumb,”  designed  by  Peter  Cooper,  the 
philanthropist.  It  had  an  upright  boiler,  smaller  than  that  which  is 
ordinarily  used  in  a  fine,  modern  dwelling.  On  January  15,  1831,  the 
South  Carolina  Railroad,  extending  from  Charleston  to  Hamburg,  in  that 
State,  the  first  American  road  to  be  constructed  with  the  specific  purpose 


AN  ERA  OF  EXPANSION  AND  STRIFE 


87 


of  operation  by  locomotive,  was  thrown  open  to  the  public.  The  “Best 
Friend,”  an  engine  designed  by  E.  L.  Miller,  of  Charleston,  and  built  in  New 
York,  was  placed  upon  the  metals  of  this  line.  In  the  year  1831  the  Balti¬ 
more  &  Ohio,  still  using  horse  power,  despite  the  inspiring  accomplish¬ 
ments  of  the  “Tom  Thumb,”  carried  80,000  passengers  and  6,000  tons  of 
freight. 

Naturally,  the  promoters  of  the  infant  railway  enterprises  of  this 
country  desired  to  be  able  both  to  sell  and  to  hypothecate  their  securities, 
and  the  public,  keenly  disposed  to  speculative  ventures,  was  glad  to 
deal  in  the  stocks.  James  W.  Bleecker,  who  had  succeeded 
Edward  Lyde,  in  1827,  as  president  of  the  New  York  Stock  and  First  railroad 

-i  x  .  securities  on  the 

Exchange  Board,  gave  way,  m  1830,  to  Russell  H.  Nevms.  In  stock  Exchange. 
August  of  that  year  the  Mohawk  &  Hudson  Railroad  was 
started,  and  its  stock  was  presently  listed  on  the  Exchange.  This  was  the 
first  railway  security  that  had  this  distinction.  The  road,  which  ran  from 
Albany  to  Schenectady,  a  distance  of  nearly  seventeen  miles,  was  completed 
in  1831,  and  in  October  of  that  year  it  carried  387  passengers  a  day. 
Serious  grades  were  avoided  by  the  establishment  at  each  end 
of  the  line  of  an  inclined  plane,  worked  by  a  stationary  engine.  Mohawk  & 

The  rails  were  of  wood,  built  upon  stone  or  timber  ties,  and  Hudson  Railroad 
the  locomotive  that  traversed  them,  snorting  with  effort  and  av0lded  grade8' 
responsibility,  had  been  imported  from  England  at  a  cost  of  about  $4,900. 
The  Mohawk  &  Hudson  Railroad  was  merged  with  the  New  York  Central 
on  November  1,  1869. 

Nothing  more  strikingly  illustrates  the  fertility  of  American  enter¬ 
prise  than  the  manner  in  which  the  people  of  this  country  seized  upon 
Stephenson’s  instrument  of  progress  and  adapted  it  to  their  needs.  The 
impulse  to  build  railroads  followed  in  a  moment  the  trail  of  our  new 
civilization,  and  was  presently  showing  its  power  from  New  England 
to  New  Orleans  and  from  the  Atlantic  seaboard  to  the  banks  of  the 
Mississippi.  The  pathways  of  iron  began  to  stretch  between  towns  that 
had  known  no  method  of  communication  save  the  stage  coach  and  the 
saddle.  The  Baltimore  &  Susquehanna,  the  New  Orleans 
&  Pontchartrain,  and  the  New  York  &  Harlem  were  Spread  of  raii- 

road-buildmg. 

among  the  earliest  lines.  Over  the  one  last  named  three 
horse-cars  were  first  run  to  Fourteenth  Street,  in  1832,  and  two  years 
later  the  line  was  extended  to  Yorkville.  So  rapidly  did  the  public  take  up 
the  new  agent  of  civilization  that  by  1837 — the  panic  year — the  United 
States  possessed  more  completed  lines  and  a  greater  aggregate  mileage 
than  any  other  country.  The  bettering  of  the  means  of  transporting 
men  and  freight  proved  a  marvellous  aid  in  working  up  the  resources  of 
our  soil,  and  stimulated  the  influx  of  the  children  of  Europe.  The  rail- 


88 


THE  NEW  YORK  STOCK  EXCHANGE 


roads  cannot  be  omitted  in  recording  the  causes  which  combined  to  foster 
immigration.  To  discuss  their  effect  upon  trade  would  be  a  work  of 
supererogation. 

We  need  not  trace  in  detail  the  building  of  the  lines  which  have  become 
the  arteries  of  the  Republic,  nor  the  manner  in  which  they  absorbed  a  con¬ 
tinually  growing  share  of  speculative  attention  in  this  city.  The  American 
people  are  unable  quite  to  refute  the  charge  of  volatility  which  has  been 
laid  at  their  doors.  They  undoubtedly  overdid  the  construction  of  rail¬ 
ways  in  the  decade  under  consideration,  as  they  overdid  many  things. 

A  few  facts  will  serve  to  illustrate  the  growth  of  our  transpor¬ 
tation  system  in  this  period.  The  population  of  the  country 
in  1830  was  12,866,020  (an  increase  of  more  than  3,000,000 
since  the  census  of  1820),  and  there  were  twenty-three  miles  of 
railroad  in  operation.  The  aggregate  mileages  operated  in 
each  of  the  next  ten  years  were  as  follows :  1831,  95  miles ;  1832,  229 

miles;  1833,  380  miles;  1834,  633  miles;  1835,  1,098  miles;  1836,  1,273 
miles;  1837,  1,497  miles;  1838,  1,913  miles;  1839,  2,302  miles;  1840 
(when  the  population  had  risen  to  17,069,453),  2,818  miles.  If  we  include 
the  roads  nearing  completion  with  those  in  actual  operation,  we  find  that 
the  total  mileage  in  1840  was  3,049.79,  divided  as  follows:1 


Statistics  illus¬ 
trating  the 
extension  of 
our  transpor¬ 
tation  system. 


New  England  States. 


Maine, . 

•  • 

14.50 

New  Hampshire, 

•  • 

.  37.30 

Massachusetts,  . 

•  • 

.  305.99 

Rhode  Island,  . 

•  • 

.  43.40 

Connecticut, 

•  • 

94.50 

Total,  . 

•  • 

.  495.69 

Middle  States. 

New  York, 

•  • 

.  373.44 

New  Jersey, 

•  • 

.  197.05 

Pennsylvania,  . 

•  • 

.  635.35 

Delaware,  . 

•  • 

39.19 

Maryland,  . 

•  • 

.  204.36 

Total,  . 

•  • 

.  1,449.39 

Southern  States. 


Virginia,  .... 

.  301.71 

North  Carolina, 

92.10 

Kentucky, 

29.00 

South  Carolina, 

.  204.00 

Georgia,  .... 

.  275.00 

Alabama,  .... 

.  46.00 

Total,  .... 

.  947.81 

Western  States. 

Ohio, . 

38.00 

Michigan,  .... 

.  118.90 

Total,  .... 

.  156.90 

Such  dread  of  the  eccentricities  of  locomotive  boilers  was  entertained  in 
the  South  that  “barrier  cars”  filled  with  bales  of  cotton  were  run  between 
the  engines  and  the  passenger  coaches.  This  protection  was 
not  long  considered  necessary.  It  will  be  noticed  that  Penn¬ 
sylvania  led  all  the  States  in  railroad  mileage  in  1840,  though 
her  population  was  only  1,724,033,  while  that  of  New  York  was  2,428,921, 

1  New  American  Supplement  to  the  Encyclopedia  Britannica.  Chicago.  1892. 


Use  of  the 
“barrier  cars.” 


AN  ERA  OF  EXPANSION  AND  STRIFE 


89 


and  Ohio,  with  only  thirty-eight  miles  of  road,  had  a  population  of 
1,519,467.  The  Boston  &  Albany  Railroad  was  finished  in  1841,  and  in 
the  following  year  railway  communication  was  established  between  Albany 
and  Lake  Erie. 


3@pp3HE  enmity  of  Andrew  Jackson  and  Henry  Clay,1  the  most  important 
personal  feud  iu  the  history  of  this  country,  and  none  the  less  so 
because  it  was  bloodless,  had  been  fed  with  fresh  fuel  in  1824,  when 
each  was  a  candidate  for  the  presidency.  Jackson  received  the  greatest 
number  of  electoral  votes,  but  failed  of  a  majority,  and  the  decision  going 
to  the  House  of  Representatives,  Clay,  who  had  been  forced  out  of  the  race, 
threw  his  influence  to  John  Quincy  Adams, 
whose  election  resulted.  Adams  then  selected 
Clay  as  his  Secretary  of  State,  and  Clay  and 
Jackson  were  immediately  at  odds.  The 
Jackson  party  shouted  “corruption”  from 
the  house-tops.  The  administration  of  Mr. 

Adams  was  notable,  chiefly  for  the  lack  of 
partisanship  and  the  devotion  to  high  ideals 
which  he  made  manifest.  It  formed  the  first 
break  since  the  election  of  Jefferson  in  the 
chain  of  the  liberal  party’s  victories.  That 
party’s  adherents,  who  now  called  themselves 
Jackson  Democrats,  were  returned  to  power, 
in  the  year  1828,  by  the  decisive  defeat  for 
reelection  of  Adams,  the  nominee  of  the  newly  formed  Whig,  or  National 
Republican,  party,  in  which  Clay  was  the  dominant  spirit.  Jackson,  whose 
personal  popularity  has  probably  never  been  matched  by  that  of  any  other 

following  are  two  stanzas  of  a  eulogium  of  Jackson  and  an  attack  on  Clay,  entitled,  “To  the  Hero  of 
New  Orleans,”  which  indicate  the  public  feeling  engendered  by  this  famous  feud.  The  verses  appeared  in 
the  Boston  Statesman  in  September,  1827,  over  the  pseudonym  “  Paoli”: 


ANUREW  JACKSON  IN  1845. 


“  From  thee  let  Judas  filch  thy  meed, 

Thy  country’s  hopes  betray ; 

’Tie  but  the  Alpha  of  his  creed 
To  take  a  traitor’s  pay ; 

His  doom — too  sure— shall  soon  be  sealed, 
His  palace  be  the  Potter’s  field 
To  hide  his  loathsome  clay ; 

He  cannot  steal  one  laurel  leaf 
That  binds  thy  brow,  immortal  chief ! 


The  deeds  thou’st  done  he  can’t  undo ; 

Nor  yet  erase  his  own ; 

Nor  wipe  ‘corruption’  from  his  brow  — 
’Tis  graven  to  the  bone ! 

And  vainly  may  he  rant  and  whine, 
‘Deny’  or  ‘challenge,’  ‘fight’  or  dine; 

Still  ‘Conscience’  holds  her  throne, 
And  duels — dinners — speech  defies; 

The  worm  that  gnaws  him  never  dies.” 


90 


THE  NEW  YORK  STOCK  EXCHANGE 


American  statesman — not  excepting  Washington,  Jefferson,  or  Lincoln — 
became  the  Chief  Executive  in  1829,  and  in  his  first  message  to  Congress 
delivered  an  attack  upon  the  Bank  of  the  United  States  which  came  like 
a  bolt  out  of  a  clear  sky. 

This  was  the  first  step  that  led  to  one  of  the  most  terrific  crises  in  the 
annals  of  the  nation.  It  would  be  a  gross  injustice  to  charge  the  panic 
of  1837  to  Jackson’s  financial  policy.  He  did  not  create  the  disaster,  he 
merely  precipitated  it.  Its  underlying  cause  was  the  recurrence  of  the 
speculative  mania  that  had  worked  destruction  nearly  twenty  years  before, 
yet  the  instrumentality  of  the  Hero  of  New  Orleans  is  a  vital  element  in 
the  story. 

It  is  a  prevalent  impression  to-day  that,  in  overthrowing  the  great 
bank,  Jackson  saved  the  nation  from  a  monster.  Undoubtedly  the  con¬ 
tinuance  of  such  an  institution  in  any  country  where  it  could  not  be 
dissevered  from  partisan  politics  would  be  likely  to  produce  trouble  in  the 
long  run.  But,  in  Jackson’s  time,  evidence  clearly  shows  that  the  bank  had 
been  a  source  of  great  benefit  to  the  community.  It  had  in- 
infiuence  of  the  fluence(j  many  of  the  State  banks  to  resume  specie  payments. 

It  had  established  a  uniform  currency,  a  safe  method  of 
keeping  Government  deposits,  and  a  valuable  system  of  domestic  exchanges. 
Its  accommodations  to  the  public  were  dictated  by  prudence,  and  yet 
sufficiently  liberal.  So  far  from  fostering  monopoly  or  pandering  to 
partisanship,  its  management  strained  every  nerve  to  keep  out  of  politics. 
At  all  events,  the  time  had  not  come  when  the  country  could  safely  dispense 
with  it. 

But  Andrew  Jackson  thought  differently.  His  view  was  not  only 
distorted  by  the  smoky  atmosphere  of  hatred  for  Clay  and  the  Whig 
party — who  favored  the  bank — through  which  he  looked  at  the  question. 
It  was  also  affected  by  his  famous  Kitchen  Cabinet :  Amos  Kendall,  Isaac 
N.  Hill,  William  B.  Lewis,  and  Duff  Green,  four  narrow  and  ill-conditioned 
politicians,  whose  opinions  he  rated  as  worthy  to  be  consulted  in  national 
affairs.  Honest  in  every  fibre  of  his  body,  courageous  as  he  was  choleric, 
and  as  sincere  in  his  desire  to  serve  the  public  as  in  his  detestation  of  his 
political  foes,  and  possessed,  furthermore,  of  sane  economic 
Jackson  led  by  j(jeas  Jackson  was  yet  a  man  to  be  led  by  the  nose.  If  he 
had  discovered  that  any  man  was  so  leading  him,  the  result 
would  have  been  unpleasant  for  the  man ;  but  with  rugged  simplicity  he 
trusted  his  advisers  to  the  last.  Kendall  and  Hill  persuaded  him  that 
Jeremiah  Mason,  a  New  England  lawyer  of  high  repute,  who  had  charge  of 
the  branch  of  the  bank  at  Portsmouth,  New  Hampshire,  was  playing 
politics.  In  his  message  of  1829  Jackson  gave  utterance  to  one  of  the  most 
foolish  public  declarations  into  which  a  great  man  was  ever  beguiled. 


AN  ERA  OF  EXPANSION  AND  STRIFE 


91 


“Both  the  constitutionality  and  the  expediency  of  the  law  creating  this 
bank,”  said  he,  “are  well  questioned  by  a  large  portion  of  our  fellow 
citizens,  and  it  must  be  admitted  by  all  that  it  has  failed  in  the  great  end 
of  establishing  a  uniform  currency.” 

Notwithstanding  the  strength  of  Jackson’s  party,  and  his  immense 
personal  following,  Congress  took  up  the  bank  question,  and  emphatically 
decided  that  the  public  deposits  were  safe  in  the  institution’s  hands.  There 
were  a  burst  of  public  astonishment  at  Jackson’s  polemics,  a  sharp  decline 
of  the  bank’s  stock,  a  quick  recuperation  when  the  underlying  facts  became 
known,  and  the  unpleasant  incident  seemed  closed.  The  average  loans 
and  discounts  of  the  bank  amounted  to  $40,000,000  at  this  time,  and  its 
yearly  profits  were  about  $3,000,000.  Roger  B.  Taney,  the  Attorney 
General,  was  its  only  foe  in  Jackson’s  official  Cabinet. 

For  a  year  or  two  other  issues  diverted  the  public  attention.  The 
Whigs,  or  National  Republicans,  held  their  first  national  convention  in 
Baltimore,  on  December  12,  1831,  and  nominated  Clay,  who 
had  acted  as  counsel  for  the  bank,  for  the  Presidency.  In  the^blnk’s  cause 
the  following  March  the  Democrats  named  Jackson  for  reelec  - 
tion.  Pennsylvania,  a  State  in  which  Jackson  was  reckoned  especially 
strong,  had  put  itself  upon  record  as  favoring  a  new  charter  for  the  bank, 
the  old  one  being  due  to  expire  on  March  3, 1836.  Inspired  by  this  event, 
Clay  had  decided  to  make  the  charter  an  issue.  It  was  one  of  the  chief 
planks  in  his  platform.  The  bank  rejoiced  at  his  decision,  and  took  prompt 
measures  to  court  the  defeat  that  awaited  itself  and  its  champion. 

Nicholas  Biddle,  of  Philadelphia,  succeeded,  in  1823,  to  the  presidency 
of  the  Bank  of  the  United  States.  No  other  American  was  so  celebrated 

abroad  as  he.  Europe  regarded 
him  as  the  greatest  of  American 
financiers.  At  home  he  was  flattered  and 
caressed  by  men  of  all  classes.  Attractive  in 
person,  affable  in  manners,  cultured,  accom¬ 
plished,  wealthy,  and  possessed  of  decided 
ability,  he  enjoyed  a  position  second  only  to 
Jackson’s  in  prominence.  He  had  been  warned 
not  to  antagonize  the  testy  Chief  Magistrate, 
yet  was  imprudent  enough  to  show  that  he 
felt  it  necessary  to  fight.  Any  man  who  was 
so  disposed  would  find  Jackson  ready  to 
accommodate  him.  On  the  charges  of  one 
Whitney,  an  insolvent  Philadelphia  merchant, 
who  had  once  been  a  director  of  the  bank,  and  was  now  Biddle’s  foe,  an 
official  investigation  of  the  institution’s  management  took  place  and 


Nicholas  Biddle. 


NICHOLAS  BIDDLE. 


92 


THE  NEW  YORK  STOCK  EXCHANGE 


resulted  in  a  virtual  vindication.  A  bill  providing  for  a  renewal  of  the 
bank’s  charter  was  soon  afterward  introduced  in  Congress,  passed,  and 
vetoed  by  the  President  on  July  10,  1832. 

Discussing  this  veto  in  the  Senate,  Mr.  Clayton,  of  Delaware,  uttered 
a  remarkable  prediction: 

“In  less  than  four  years  the  pecuniary  distress,  the  commercial  embar¬ 
rassments,  consequent  upon  the  destruction  of  the  United  States  Bank, 
must  exceed  anything  which  has  ever  been  known  in  our 
prophecy^00'8  history.  .  .  .  The  loss  of  confidence  among  men ;  the  total 
derangements  of  that  administrative  system  of  exchanges 
which  is  now  acknowledged  to  be  better  than  exists  in  any  other  country 
on  the  globe ;  overtrading  and  speculation  on  false  capital  in  every  part  of 
the  country;  that  rapid  fluctuation  in  the  standard  of  value  for  money, 
which,  like  the  unseen  pestilence,  withers  all  the  efforts  of  industry,  while  the 
sufferer  is  in  utter  ignorance  of  the  cause  of  his  destruction ;  bankruptcies 
and  ruin,  at  the  anticipation  of  which  the  heart  sickens,  must  follow  in  the 
long  train  of  evils  which  are  assuredly  before  us.” 


and  Clay’s 
defeat. 


Biddle  was  not  dismayed  by  the  veto.  On  the  day  in  which  Jackson 
transmitted  it  to  Congress,  the  banker  wrote  to  Clay  in  a  tone  of  exulta¬ 
tion.  He  declared  that  the  message  had  “all  the  fury  of  a 
Biddle’s  rhetoric  chained  panther  biting  the  bars  of  his  cage,”  and  hailed  the 
Whig  candidate  as  the  deliverer  of  his  country  from  the 
miserable  crew  in  power.  Jackson  was  chosen  for  a  second 
term,  and  accepted  the  people’s  decision  as  his  vindication.  The  bank  was 
doomed. 

In  this  crisis  Biddle  further  antagonized  the  President  by  a  foolish 
quarrel  over  a  claim  held  by  this  country  upon  France,  which  the  bank  had 
undertaken  to  collect,  and  the  payment  of  which  was  delayed  after  the 
institution  had  credited  the  Government  with  the  amount  upon  its  books. 
He  made  another  blunder  in  secretly  effecting  an  arrangement,  with  the 
Barings  of  London,  for  the  extension  of  some  three  per  cent.  United  States 
bonds  which  the  Government  had  resolved  to  redeem.  Jackson  decided  to 
remove  the  Government  deposits  from  the  bank,  and  accord¬ 
ingly,  in  1833,  dismissed  from  office  the  Secretary  of  the 
Treasury,  W.  J.  Duane,  and  appointed  Roger  B.  Taney  as 
his  successor.  Taney  began  putting  the  incoming  revenues  into  various 
State  banks,  several  of  which  were  in  this  city.  The  institutions  so  favored 
were  selected  by  Jackson,  and  known  as  the  “pet  banks.”  The  Bank  of 
the  United  States  was  forced  to  contract  its  discounts  and  loans.  Failures 
and  general  distress  resulted. 

The  crisis,  however,  as  yet  had  not  arrived.  It  hovered  over  the 
country  for  three  years  longer,  the  enforced  curtailing  of  the  bank’s 
business,  which  had  been  conducted  on  sound  lines,  and  the  extravagances 


Removal  o f  the 
deposits. 


AN  ERA  OF  EXPANSION  AND  STRIFE 


93 


to  which  the  possession  of  the  Government  funds  induced  the  State 
depositaries,  each  helping  to  bring  on  the  trouble.  Jackson  further 
strengthened  himself,  in  1833,  by  taking  a  firm  stand  with  South  Carolina, 
which  disliked  a  tariff  measure  passed  in  the  previous  year — although 
it  somewhat  reduced  duties  — and  was  threatening  to  secede.  Through 
1834  and  1835  the  storm  kept  gathering,  and  in  1836  the  famous  “specie 
circular”  was  issued. 


Land 

speculations. 


HHE  country  had  been  enjoying  a  period  of  expanding  trade  and 
increasing  imports,  accompanied  by  apparent  prosperity.  Specula¬ 
tion  in  Government  lands  had  been  going  on  at  a  furious  rate 
and  payments  for  these  lands  had  been  made  in  State  bank  notes,  which 
were  most  freely  loaned.  Before  entering  on  a  discussion  of 
the  disaster  of  1837,  nowhere  more  crushingly  felt  than  in 
New  York  City,  it  will  be  well  to  take  a  single  glance  at 
the  expansion  which  preceded  it  in  the  metropolis. 

Some  adequate  idea  of  the  city’s  commercial  growth  in  the  first  half- 
century  after  the  close  of  the  Revolutionary  War,  and  the  establishment  of 
the  Bank  of  New  York,  may  be  obtained  from  a  comparison 
of  the  financial  condition  of  the  municipality  in  1783  and 
1785  with  its  condition  in  1836.  The  British  evacuated 
New  York  in  November,  1783,  nearly  two  months  after  the 
signing  of  the  Treaty  of  Paris,  and  the  following  year,  it  will  be  recalled, 
saw  the  founding  of  the  Bank  of  New  York.  In  the  twenty  months  inter¬ 
vening  between  December  26,  1783,  and  September  1, 1785,  the  schedule 
of  municipal  income  and  outgo  was  as  follows : 


Growth  of 

municipal 

finances. 


Keceipts. 


Cash  from  £10,000  tax, 

.  £9,341 

Lots  sold  at  North  River,  . 

.  2,086 

Lots  sold  at  Peck  Slip, 

.  1,431 

Excise, . 

.  2,006 

Quit  rent  ( includ  ing  war  arrears ) ,  4,276 

Ground  rent  (including  war 

ar- 

rears),  .... 

.  3,100 

Docks  and  slips,  . 

.  868 

Ferries,  .... 

.  915 

House  rent,  .... 

.  410 

Total,  .... 

£24,433 

Expenditures. 

Poor  House,  ....  £5,027 
Watch  and  lamps,  .  .  .  4,500 

Roads, . 678 

Pumps  and  wells,  .  .  .  789 

General  election,  .  .  .  .  57 

Assessing  £10,000  tax,  .  .  170 

Bridewell,  furnishing  and  sup¬ 
porting  prisons,  .  .  .  3,470 

Food,  etc.,  for  criminals,  .  .  702 


Interest  on  bonds  due  before  the 

war, . 1,844 

Repairs  to  building  and  contin¬ 
gent  charges,  ....  7,937 


Total,  ....  £25,174 


94 


THE  NEW  YORK  STOCK  EXCHANGE 


Recollecting  that  these  are  figures  for  twenty  months,  and  translating 
the  totals  into  their  equivalents  in  American  currency,  upon  the  assump¬ 
tion,  for  convenience,  that  £1  sterling  equals  $4.86,  it  is  found  that 
the  yearly  receipts  for  the  period  were,  approximately,  $71,246,  and  the 
yearly  expenditures  $73,407.  With  these  results  may  be  compared  the 
schedule  of  ordinary  income  and  outgo  in  1836,  as  given  by  Hardenbrook:1 


Receipts.  Expenditures. 


Sales  of  manure, 

.  $42,000 

Almshouse  support, 

$205,000 

Commutation  of  alien  passen- 

Charitable  donations, 

6,000 

gers,  .... 

.  37,000 

Cleaning  streets, 

180,000 

Court  fees  and  fines,  . 

.  20,000 

Coroner’s  fees, 

4,000 

Penalties  for  ordinance  viola- 

Refreshments  and  coach  hire 

tions,  .... 

250 

for  Common  Council, 

7,000 

Rents  of  wharves  and  slips, 

.  49,000 

Courts,  .... 

50,000 

Market  fees, 

.  21,000 

Elections, 

7,500 

Market  rents, 

.  21,000 

Fire  Department,  . 

60,000 

Street-vault  permits,  . 

.  8,000 

Tax-levy  expenses,  . 

10,000 

License  fees  (exclusive  of  excise) 

3,000 

City  lighting,  . 

88,000 

Tavern  and  excise  licenses, 

.  30,000 

Public  schools, 

88,000 

Water-list  rent,  . 

.  4,000 

Maintaining  the  markets, 

17,000 

Ground  rent, 

.  27,000 

Police  Department, 

25,000 

Common-land  rent,  . 

.  1,000 

City  watch, 

160,000 

Ferry  rent,  .... 

.  12,000 

Other  salaries, 

50,000 

House  rent, 

.  5,000 

Stationery  and  printing, 

23,000 

Vendue  sales, 

.  1,000 

Roadworking  and  repairing, 

40,000 

Other  sources  (say),  . 

.  30,000 

Other  expenses  (say), 

100,000 

Total,  .... 

$311,250 

Total, 

$1,120,500 

It  is  evident,  from  this  comparison,  that  the  municipal  receipts  had 
increased  about  337  per  cent,  in  the  intervening  period,  and  the  city’s 
expenses  more  than  1,426  percent.  The  development  of  the  young  metrop¬ 
olis  was  accompanied  by  a  growing  disposition  to  spend  more  than  its 
income,  and,  as  a  consequence,  New  York  City’s  outstanding  funded  debt 
amounted,  in  1836,  to  $2,480,000.  This  seems  of  small  significance,  in  view 
of  the  bond  issues  of  the  present  day ;  but  it  must  not  be  forgotten  that  the 
great  bulk  of  the  money  spent  by  the  municipality  in  1836 
was  to  satisfy  current  demands.  It  did  not  go,  in  any  marked 
degree,  either  into  lucrative  investments,  such  as  the  system  of 
docks  now  existing,  or  into  other  public  improvements  the  cost  of  which 
might  be  fairly  saddled  upon  succeeding  generations,  to  whose  benefit  they 
were  to  redound.  There  was  no  such  plausible  excuse  for  the  city  fathers  of 
1836.  The  piper  performed  at  their  bidding,  and  they  instructed  him  to 
present  his  bill  to  their  grandchildren. 


Issue  of 
city  bonds. 


1  Financial  New  York:  William  T.  E.  Hardenbrook.  New  York.  1899. 


AN  ERA  OF  EXPANSION  AND  STRIFE 


95 


Jackson  issues 
the  specie 
circular. 


HHREE  events,  of  which  Jackson  was  directly  or  indirectly  the  cause, 
in  1836  conspired  to  pave  the  way  for  disaster.  The  great  bank, 
having  obtained  a  charter  from  Pennsylvania,  and  being  at  a  loss 
to  use  its  capital  in  a  single  State  after  the  conventional  fashion,  began  to 
lend  with  terrific  recklessness  on  all  sorts  of  collateral.  The  President 
issued  the  “specie  circular,”  directing  that  payments  for  Government 
lands,  the  sales  of  which  amounted  to  $24,877,000  in  1836, 
should  be  made  in  coin,  and  thus  forcing  the  public  to  demand 
that  the  State  banks  should  redeem  their  notes  in  specie — a 
thing  that  many  of  them  could  not  do.  He  also  announced 
that  the  national  debt  was  paid,  and,  a  measure  being  passed  to  distribute 
the  surplus  among  the  States,  the  “pet  banks”  were  called  on  to  surrender 
the  Government  deposits,  thus  causing  frightful  contraction. 

There  were  634  banks  in  this  country  in  1837,  with  an  aggregate 
capital  of  $291,000,000,  loans  of  $525,000,000,  notes  of  $149,000,000, 
and  specie  back  of  the  notes  amounting  to  only  $38, 000, 000. 1  The  weak¬ 
ness  of  this  situation  is  apparent.  The  Government,  being  paid  for  its 
lands  in  virtually  irredeemable  notes,  which  it  deposited  in  the  banks,  and 
which  were  at  once  loaned  out  for  fresh  land  speculations,  was  really  receiv¬ 
ing  nothing  but  bank  credits.  Naturally,  Jackson  desired  to  end  such  a 
situation ;  but  his  circular  proposed  a  remedy  so  sudden  and  drastic  as  to 
cause  fearful  havoc.  Banks,  merchants,  and  manufacturers  began  to  fail. 

On  January  1,  1837,  the  surplus  available  for  distributing  among 
the  States,  according  to  their  proportional  representation  in  Congress, 
amounted  to  $37,468,859.  The  first  instalment  of  twenty- 
five  per  cent,  was  paid,  and  on  April  1st,  after  frightful  contrac¬ 
tions,  the  “pet  banks”  produced  the  second.  Meanwhile  the 
land  speculators  were  calling  on  all  the  banks  for  specie,  and 
our  British  creditors,  who  were  experiencing  trouble  of  their 
own  at  home,  were  calling  upon  this  country  to  pay  what  it  owed.  Before 
the  third  instalment  of  the  surplus  could  be  paid  the  crash  came.  On  May 
10th  the  New  York  banks  suspended  specie  payment  in  a  body,  and  all  the 
banks  of  the  country,  including  the  United  States  Bank,  followed  suit. 
The  calamity  spread  instantly  to  the  general  public.  The  manufacturer  of 
clothes  and  shoes,  the  merchant,  the  farmer,  the  ironmonger,  and  the 
broker,  were  engulfed  in  the  whirlpool  of  bankruptcy.  Desolation  and 
penury  awoke  the  happy  dreamer  from  visions  of  speculative  fortune  to 
the  prospects  of  hunger  and  eviction.  The  collapse  was  as  complete  as 
the  inflation  had  been  general.  As  the  maker  of  cotton  prints  became 
insolvent  with  the  failure  of  his  bank,  so  did  the  Southern  planter  find 
his  market  destroyed.  Cotton  prices,  which  had  soared  to  twenty  cents  a 

1  Life  of  Henry  Clay  :  Carl  Schurz.  Boston  and  New  York.  1887. 


Distribution  of 
the  surplus  and 
suspension  of 
the  banks. 


96 


THE  NEW  YORK  STOCK  EXCHANGE 


Fall  of  cotton 
prices. 


Banks  attempt 
to  stave  off 
calamity. 

counts  by 


pound  in  the  previous  August,  fell  to  eight  cents  in  this  terrible  May. 
Nine-tenths  of  the  merchants  of  Mobile,  Mr.  Schurz  tells  us,  suspended 
payment.  The  values  of  land,  which  had  piled  up  paper 
fortunes  in  a  year,  annihilated  them  in  a  night.  Prostrate 
in  the  ashes  of  their  hopes,  the  unhappy  speculators  racked 
their  brains  to  comprehend  the  cause  of  the  calamity  which  they  them¬ 
selves  had  brought  about. 

Transactions  on  the  Stock  Exchange  in  this  city  naturally  indicated 
the  progress  of  disaster,  and  when  it  was  fairly  come  Wall  Street  was 
daily  crowded  with  throngs  of  merchants  and  other  business  men,  not  only 
besieging  the  banks  to  learn  what  help  could  be  obtained,  but  watching 
with  fierce  anxiety  the  quotations  in  the  securities  market.  The  newspaper 
press  of  the  time  described  the  conditions  as  unparalleled.  Before  the 
New  York  banks  were  forced  to  suspend  specie  payments  they 
made  some  united  efforts  to  alleviate  the  public  stringency. 
On  March  30,  1837,  under  the  chairmanship  of  Albert  Gal¬ 
latin,  they  met  and  agreed  to  increase  their  aggregate  dis- 
,500,000.  This  was  well  meant,  but  could  not  head  off  the 
calamity.  On  April  7  the  Evening  Post  declared:  “Confidence  is  at  so 
low  an  ebb  as  to  be  indescribable.  There  seems  to  be  a  perfect  panic.  The 
failures  of  yesterday  and  the  day  before  are  unexampled  in  the  history  of 
New  York.  The  very  best  houses  are  daily  suspending  payment.”  Flour 
meanwhile  had  risen  to  $9.50  a  barrel  and  wheat  to  $1.60  a  bushel. 

John  Ward,  Edward  Prime,  and  R.  D.  Weeks  had  served  as  presidents 
of  the  New  York  Stock  and  Exchange  Board  between  1831  and  1837,  and 
in  the  panic  year  David  Clarkson,  one  of  the  most  prominent  speculators  in 
the  market,  was  chosen  for  the  office.  The  Board  was  then 
meeting  on  the  second  floor  of  a  building  which  an  English¬ 
man,  named  Jauncey,  had  once  used  as  a  stable,  the  room  in 
which  they  sold  stock  having  formerly  served  as  a  hay-loft.  This  building 
occupied  what  is  now  the  site  of  No.  43  Wall  Street.  The  brokers  had 
moved  into  it  in  the  previous  year,  after  using  alternately  a  room  at 
Howard’s  Hotel,  No.  8  Broad  Street  (part  of  the  site  of  the  Stock  Exchange 
Building  of  to-day),  for  which  they  paid  $3  a  day,  and  a  back  room  in  the 
basement  of  “John  Warren’s  building,”  as  the  records  describe  it,  the  rent 
of  which  was  $750  a  year.  All  these  peregrinations  were  due  to  the  great 
fire  of  December  16,  1835,  which  ravaged  the  financial  district  and 
destroyed  the  Merchants’  Exchange,  along  with  692  other  buildings,  cov¬ 
ering  thirteen  acres  of  ground.  The  loss  was  estimated  at  $18,000,000. 
A  watchman,  J.  R.  Mount,  earned  the  thanks  of  the  Board  and  a  gift  of 
$100  by  rescuing  the  “iron  chest”  of  the  brokers  from  the  flames  of  the 
Merchants’  Exchange. 


Hay-loft  taken 
by  brokers. 


AN  ERA  OF  EXPANSION  AND  STRIFE 


97 


Some  quotations  of  the  business  transacted  in  the  quondam  hay-loft 
will  prove  of  value.  On  January  24,  1837,  these  sales  were  made : 


Stock. 

No. Shakes 
Sold. 

Price. 

United  States  Bank, . 

50 

120 

“  “  b  60, 

100 

121 

“  “  b  60, 

100 

121% 

“  “  30  days,  .... 

100 

121 

(6  (6 

200 

119% 

u  u 

100 

120 

Dry  Dock  Bank, . 

50 

170 

Commercial  Bank, . 

10 

108 

“  “  (on  time)  .... 

25 

111 

Bank  of  the  State  of  New  York, 

75 

112 

Morris  Canal  &  Banking  Company, 

200 

105 

66  66  66 

200 

106 

66  66  66 

50 

105% 

“  “  “  (on  time) 

100 

105 

Farmers’  Loan  &  Trust  Company, 

100 

113 

66  66  66 

50 

112% 

“  “  “  (on  time)  . 

100 

114 

Kentucky  Bank, . 

250 

92% 

“  “  b30, . 

53 

94 

Leather  Manufacturers’  Bank, 

25 

117 

Mohawk  &  Hudson  Railroad,  .... 

150 

94 

66  66  66 

•  •  •  • 

100 

93% 

“  “  “  b  15, 

50 

95 

Mechanics  Bank, . 

50 

120 

City  Bank, . 

50 

139 

Phoenix  Bank, . 

26 

127 

Delaware  &  Hudson  Canal  Company, 

25 

97% 

66  66  66 

10 

97 

“  “  “  b  10,  . 

200 

97 

66  66  66 

100 

96% 

“  “  “  b  10,  . 

100 

96 

“  “  “  b  20,  . 

100 

97 

“  “  “  (on  time) 

100 

97 

“  “  “  (on  time) 

200 

97 

“  “  “  60  days, 

100 

98 

Yicksburgh  Bank, . 

100 

97% 

Ohio  Life  Insurance  &  Trust  Company,  . 

50 

116% 

66  66  66 

50 

116 

American  Trust  Company,  Baltimore,  . 

50 

104% 

“  “  “  b  30, 

250 

105% 

“  «  “  b  50, 

100 

106 

Illinois  Bank, . 

150 

103 

State  Marine  Insurance  Company,  . 

50 

80 

Eagle  Insurance  Company,  .... 

57 

97 

Patterson  Railroad  Company,  . 

10 

80% 

98 


THE  NEW  YORK  STOCK  EXCHANGE 


As  the  calamity  spread  across  the  country,  the  prices  of  securities 
tended  steadily  downward.  On  May  9th,  the  day  before  the  banks  of  New 
York  suspended  specie  payment,  the  market  had  reached  the  lowest  ebb. 
The  record  of  that  day’s  business  was  as  follows : 


Stock. 

.No.  Shares 
Sold. 

Price. 

United  States  Bank,  cash,  .... 

S 

250 

96 

(t  u  a 

•  •  •  • 

50 

95% 

“  “  (next  week) 

250 

96 

Farmers’  Loan  &  Trust  Company,  cash, 

110 

71 

ii  ii  ii 

•  •  • 

90 

70 

Harlem  Railroad  Company,  cash, 

20 

39% 

“  “  “  30  days, 

100 

43 

Providence  &  Boston  Railroad,  cash, 

25 

84% 

ii  ii  ii  ii 

50 

84% 

a  a  a  a 

50 

84% 

New  Jersey  Railroad  Company,  cash, 

134 

74 

ii  ii  ii  ii 

20 

73% 

Delaware  &  Hudson  Canal  Company,  cash,  . 

50 

50 

“  “  “  “  s  3  days, 

100 

50 

ii  ii  ii  ii 

170 

50% 

American  Trust  Company,  Baltimore,  cash,  . 

15 

60 

Ohio  Life  Insurance  &  Trust  Company,  cash, 

25 

80 

a  a  a  a  a 

it 

10 

79% 

a  a  a  a  a 

60 

79% 

a  a  a  a  a 

20 

79% 

a  a  a  a  a 

35 

78 

Worcester  &  Boston  Railroad,  s  15  days, 

50 

75% 

Utica  &  Schenectady  Railroad,  60  days, 

85 

105% 

“  “  “  s  3  days, 

50 

105 

The  foregoing  quotations  are  from  the  Evening  Post’s  market  sum¬ 
maries  published  on  the  dates  given.  By  the  same  authority  it  appears  that 
on  the  day  of  suspension,  May  10th,  the  market  recovered 
Prices  recover  tremendously,  the  belief  that  the  worst  wras  over  seeming 

after  suspension.  ° 

to  prevail.  The  trading  aggregated  2,290  shares.  United 
States  Bank  sold  up  to  par  for  cash ;  Delaware  &  Hudson  advanced  to  67 ; 
Morris  Canal  to  51;  Farmers’  Loan  &  Trust  Company  to  80;  Ohio  Life 
Insurance  &  Trust  Company  to  par;  Harlem  Railroad  to  55;  Boston  & 
Providence  to  98,  and  New  Jersey  Railroad  to  85. 

In  this  city  the  largest  failure  caused  by  the  panic  was  that  of  J.  L.  & 
S.  Josephs,  the  Rothschild  agents,  who  had  been  rated  at  $500,000.  Their 
ruin  was  so  complete  that  even  their  furniture  had  to  be  sold  at  auction, 
and  they  dragged  down  many  others  in  their  fall.  The  largest  cotton 
house  in  the  United  States,  Yeatman,  Woods  &  Co.,  of  New  Orleans,  sue- 


AN  ERA  OF  EXPANSION  AND  STRIFE 


99 


cumbed  on  April  14th,  with  liabilities  of  $15,000,000.  The  only  help 
which  the  public  got  from  the  Government  was  an  issue  of  Treasury  notes 
to  the  amount  of  $10,000,000.  There  was  tremendous  feeling  intense  public 
among  the  Whigs  against  the  Jackson  party,  which  was  still  rancor, 
in  power,  Martin  Yan  Buren  having  succeeded  to  the  presidency  in  March. 
One  Whig  journalist,  quoted  in  the  Evening  Post,  did  not  hesitate  to 
suggest  Yan  Buren ’s  assassination. 


RUINS  OF  THE  MERCHANTS1  EXCHANGE,  AFTER  THE  FIRE  OF  1835. 

(From  a  rare  print  in  the  collection  of  Henry  Harmon  Neill.) 

CONGRESS,  notwithstanding  the  country’s  wretchedness,  distributed 
&  to  the  States  the  third  instalment  of  the  surplus  on  July  1st,  a 
“  deficit  for  the  next  year  being  in  prospect  at  the  time.  Then  the 
distribution  bill  was  repealed  and  the  fourth  instalment  was  not  turned 
over.  The  States  have  never  been  called  upon  to  repay  the  money  allotted 
to  them.  It  now  figures  on  the  Government  books  as  “ unavailable  funds.” 
The  United  States  Bank  suspended  a  second  time,  in  1838.  Biddle  resigned 
in  the  following  year.  Happily  the  Government  had  received,  before  the 
great  crash  came,  all  that  was  due  to  it  from  the  bank.  In  1841  the  insti¬ 
tution  ended  its  career.  Its  creditors  were  finally  paid  in  full  and  its  share¬ 
holders  wiped  out.  Biddle  lived  to  stand  a  civil  suit,  because  of  his  conduct 
of  the  bank’s  affairs,  and  to  see  the  sycophants  who  had  fawned  upon  him 
cut  him  on  the  street.  The  idol  of  women,  the  favorite  of  Europe,  the 
ornament  of  society,  and  the  wielder  of  great  power  died  in  poverty  and 
wretchedness  at  the  age  of  fifty-eight. 


VII 

FROM  JACKSON’S  DAY  TO  THE  CIVIL  WAR 

HE  chief  factors  in  the  country’s  financial  and  political  life 
during  the  period  between  Jackson’s  rule  and  the  attack 
upon  Fort  Sumter  have  been  already  indicated  in  the  discus¬ 
sion  of  earlier  events.  It  is  not  requisite  to  enter  minutely 
into  the  national  history  of  the  quarter  of  a  century  ending 
with  1860.  Nor  is  this  era  especially  significant  in  the 
records  of  trade  in  securities.  The  Civil  War  marks  the  true  rise  of  the 
gigantic  stock  speculation  which  now  plays  so  prominent  a  part  on 
the  stage  of  America’s  financial  affairs.  But  in  the  twenty-five  years  just 
preceding  the  rending  of  the  Union  the  Stock  Exchange  did  give  rise  to  a 
new  personality  that  demands  attention — that  of  the  speculative  monarch. 

Before  the  advent  of  Jacob  Little,  our  trading  in  stocks  could  not  be 
classed  as  spectacular.  There  were  no  great  market  leaders.  Certain 

Jacob  Little, 
first  of  the 
speculative 
kings. 

public  eye  as  to  have  an  entire  army  of  adherents  hanging  upon  his  every 
move.  Little  was  the  pioneer  of  that  class  of  speculators  of  which  Drew, 
Commodore  Yanderbilt,  Gould,  and  Woerishoffer  later  became  conspicuous 
examples.  It  may  be  doubted  if  any  one  has  ever  commanded  a  larger 
share  of  Wall  Street’s  attention  than  he  aroused  at  the  height  of  his  career. 

Jacob  Little  learned  the  rudiments  of  stock-dealing  as  a  clerk  in  the 
employ  of  Jacob  Barker,  a  wealthy  merchant  and  broker  of  Jackson’s  day. 
He  went  into  business  for  himself  in  1835,  founding,  with  his  brother,  the 
firm  of  Jacob  Little  &  Co.  In  the  panic  two  years  later,  his  keen  eyes 
having  caught  the  real  drift  of  events,  he  reaped  the  profits  of  a  bold  cam¬ 
paign  on  the  short  side  of  the  market.  While  Barker,  his  old  employer, 


individuals — men  like  Nathaniel  Prime — were  recognized  as 
displaying  specific  prominence,  just  as  a  merchant  or  a  banker 
might  enjoy  a  like  distinction.  But  no  one  had  won  the  title 
of  a  master  of  manipulation  or  grown  so  important  in  the 


FROM  JACKSON’S  DAY  TO  THE  CIVIL  WAR 


101 


was  falling  into  the  pit  of  bankruptcy,  the  former  clerk  was  accumulating 
the  nucleus  of  his  fortune.  His  prominence  virtually  dated  from  the  panic 
year,  as  did  that  of  August  Belmont,  who  came  from  Havana  to  New  York, 
after  the  failure  of  the  Josephs  in  the  crash  of  1837,  to  take  their  place  as 
representative  of  the  Rothschilds. 

The  newspapers  of  Jacob  Little’s  day  had  not  learned  to  exploit  in 
print  the  achievements  of  stock  operators,  and  his  mighty  deeds  are  partly 
shrouded  in  the  shadows  of  tradition.  He  made  and  lost  a  number  of 
fortunes,  and  was  only  moderately  well-to-do  when  he  died.  He  was  a  tall, 

slender,  carelessly  dressed  man,  with 
a  smooth  face,  sloping  shoulders, 
and  a  far-away  look  in  his  eyes.  He 
appeared  to  be  meditating  on  the 
happiness  of  a  better  world  at  the 
moment  when  he  was  calculating 
just  how  many  more  shares  he 
needed  to  complete  some  scheme  for 
a  ‘  ‘  corner.  ’  ’  Respecting  his  capacity 
to  take  on  a  heavy  line,  hear  the 
testimony  of  an  unnamed  writer 
of  the  period:  “The  only  thing 
remarkable  about  this  gentleman 
is  his  extraordinary 
appetite  .  .  .  for 

he  has  been  known  to 
gorge  and  digest  more  stock  in  one 
day  than  the  weight  of  the  bulk  of 
his  whole  body  in  certificates.” 
Little  was  perpetually  engaged  in 
speculation,  devoting  the  mornings 
to  cotton  and  other  staples  and  the 
afternoons  to  securities.  Southern 
stocks  were  a  favorite  sphere  for  his 
activities.  So  enwrapped  in  his 
business  did  he  become  that  he 
permitted  even  Sunday  to  be 
encroached  upon. 

Curt  and  cold  in  his  manner,  Little  was  known  to  be  a  man  of  good 
heart  and  generous  to  a  vanquished  foe.  He  was  also  noted  for  eccen¬ 
tricities,  among  them  the  disposition  to  burden  himself  with  duties  that 
an  able-bodied  office  boy  could  have  discharged.  He  always  delivered  in 
person  the  stock  he  had  sold,  being  determined  that  no  one  should  lose  it  on 


His  appetite 
for  securities. 


JACOB  LITTLE. 


102 


THE  NEW  YORK  STOCK  EXCHANGE 


the  way.  His  generalship  was  never  better  illustrated  than  in  his  famous 
Erie  coup,  which  was  imitated  in  after  years.  There  was  at  the  time  a 
brisk  market  abroad  for  American  railway  securities.  The  panic  had  been 
attended  by  the  repudiation  of  various  State  bond  issues,  which  then  dis¬ 
appeared  from  the  London  market,  where  they  had  been  a 
in  Erie°U8  C°UP  ^ac^or-  In  1838  they  were  succeeded  by  stocks  and  bonds  of 
our  new  railroads — the  Camden  &  Amboy  being  the  first,  soon 
followed  by  the  Lehigh,  Harrisburg  &  Lancaster,  Richmond,  Reading,  and 
others — so  that  in  two  years  there  was  a  recognized  American  railroad 
market  in  London.  Eventually,  Erie  bonds,  convertible  into  stock,  were 
bought  and  sold  there.  Little  had  started  a  bear  campaign  against  Erie 
shares,  disposing  of  large  blocks  of  the  stock  on  sellers’  options,  ranging 
from  six  to  twelve  months.  A  clique  of  bulls  decided  to  corner  him,  and  ran 
up  the  price  with  that  intent.  When  the  famous  bear’s  contracts  matured 
it  was  found  that  he  had  quietly  sent  over  to  London  and  purchased 
convertible  bonds  wherewith  to  protect  himself.  He  turned  the  bonds  into 
stock,  which  he  delivered  to  the  buyers,  and  emerged  from  the  crisis 
unscathed.  As  a  result,  the  New  York  Stock  and  Exchange  Board  adopted 
a  rule  limiting  the  duration  of  sellers’  options  to  sixty  days.  This  did  not 
prevent  future  performances  of  the  sort  by  which  Mr.  Little  won  his  fame. 

David  Clarkson  and  John  Ward  were  among  the  most  notable  specula¬ 
tors  in  Little’s  time,  though  neither  of  them  approached  him  in  repute. 
Ward  was  concerned,  with  Daniel  Drew — who  did  not  really  attain  great 
prominence  as  a  Wall  Street  man  till  the  advent  of  the  Civil  War — in  a 
corner  in  the  stock  of  the  Morris  Canal  and  Banking  Company,  which  was 
known  in  Street  parlance  as  the  Morrison  Kennel.  According  to  a  print 
of  the  time,  Drew  visited  Ward’s  office  and  suggested  putting  up  “the 
Morrison.” 

“ What  do  you  propose ?”  Mr.  Ward  is  said  to  have  asked.  “Why,” 
replied  Drew,  “you  have  the  means.  The  stock  may  be  had  at  twenty,  and 
$100,000  would  control  the  whole  of  it.  It  must  be  done  quietly,  and  then, 
by  contracting  on  time,  we  should  have  the  power  to  deliver  without  loss, 
when  we  sold,  and,  by  making  three  contracts  to  receive  to 
a  successful  one  to  deliver,  we  can  make  them  pay  whatever  difference  we 

corner  <xdgi  h  j  ■*•  «/ 

few  scruples.  choose.”  “That  would  be  too  much  power  to  get  into  our 
hands,  Dan,  would  it  not?”  suggested  Mr.  Ward.  “True,” 
Drew  is  said  to  have  replied.  “It  would  not  just  answer  to  trust  every 
man  with  so  much,  but  in  your  hands  and  mine  I  think  it  would  not  be 
abused.”  “What  amount  of  exaction  do  you  think  would  be  an  abuse  of 
such  power?  ”  “  Why,  it  would  be  wrong,”  was  the  answer,  “  to  make  more 
than  two  hundred  per  cent,  profit,  unless  we  got  hold  of  some  one  who 
could  well  afford  it.” 


FROM  JACKSON’S  DAY  TO  THE  CIVIL  WAR 


103 


Inasmuch  as  there  was  probably  no  ear-witness  of  this  conversation, 
and  neither  of  the  participants  was  likely  to  describe  it  for  publication,  the 
reader  may  be  pardoned  for  doubting  its  accuracy.  But  it  is  particularly 
interesting,  as  showing  the  scruples  attributed  to  these  illustrious  manipu¬ 
lators.  Drew,  of  whom  we  have  by  no  means  seen  the  last,  was  never,  in 
fact,  forgetful  of  the  dictates  of  religion.  He  seemed  unwilling  to  entrap 
the  public  by  an  ingenious  device  or  to  desert  an  old  friend  for  a  new  ally 
without  first  invoking  supra-mundane  assistance.  His  corner  in  the 
“Morrison”  was  exceptionally  successful,  and  the  frightened  shorts  forced 
the  stock  to  185  in  their  efforts  to  cover.  Little  is  credited  with  having 
also  been  a  prime  mover  in  this  early  corner. 

Business  depression  and  dulness  naturally  succeeded  the  panic  of  1837, 
and  with  the  falling  of  the  commercial  barometer  came  a  decline  in  the 
value  of  New  York  real  estate.  In  1840  the  New  York  Stock  and  Exchange 
Board  rejected  a  very  sensible  proposition  to  take  advantage  _  , 

J  u  L  L  °  Brokers  reject  a 

of  the  low  prices  and  use  its  surplus  to  buy  a  site  m  Wall  proposal  to  buy 
Street  for  a  new  home.  Later  the  Board  voted  to  divide  the  a  site  for  the 
surplus — amounting  to  about  $20,000 — among  its  eighty-  Exchange- 
eight  members.  The  year  1840,  in  which  the  population  of  the  country 
had  risen  to  17,069,453  persons,  became  memorable  through  the  adoption 
of  a  measure  to  found  the  Sub-Treasury  system.  In  the  fall,  however, 
the  country  being  eager  for  a  change,  in  the  hope  of  shaking  off  hard 
times,  the  Whigs  were  swept  into  power.  General  William  Henry  Harrison, 
the  hero  of  Tippecanoe,  defeated  Van  Buren  with  ease.  He  died  soon  after 
his  inauguration  in  1841,  and  the  Vice-President,  John  Tyler,  who  suc¬ 
ceeded  him,  approved  a  measure  which  Clay  fathered,  repealing  the  inde¬ 
pendent  Treasury  law.  It  was  eventually  re-established  and  on  a  firm 
basis,  in  1846,  under  a  Democratic  administration. 

Tyler  incurred  the  enmity  of  his  own  party  by  vetoing  their  favorite 
measures,  and  when  he  disapproved  a  bill  to  establish  the  fiscal  bank,  his 
entire  Cabinet,  with  the  exception  of  Daniel  Webster,  who  was  Secretary  of 
State,  resigned.  Webster  remained  in  office  to  complete  a  treaty  with 
England,  defining  our  northeasterly  boundary  and  providing  for  the 
suppression  of  the  slave  trade.  It  was  signed  on  August  9, 1842. 


OME  time  prior  to  1836,  a  rival  organization  had  been  formed  to 
compete  with  the  New  York  Stock  and  Exchange  Board.  Its 
members  were  severely  hurt  in  the  panic,  but  continued  their  activi¬ 
ties.  The  small  speculators,  despite  repeated  disasters,  also  continued  their 
efforts.  The  anonymous  author  of  “A  Week  in  Wall  Street,”  published 
in  1841,  paid  his  respects  to  them  as  follows : 


104 


THE  NEW  YORK  STOCK  EXCHANGE 


“They  have  neither  trade  nor  profession  of  any  kind,  and  if  they  ever 
had  any  they  have  abandoned  it.  Some  of  them  are  of  that  class  called 
gentlemen,  who  have  married  fortunes  and  squandered  them ; 
a  glimpse  of  the  some  are  broken  merchants ;  some  disgraced  politicians  .  .  . 
street  in  1841.  and  some  of  them  are  loafers.  They  have  neither  wit  enough 
to  contrive  nor  credit  enough  to  carry  out  a  speculation ;  but 
when  one  is  begun,  like  that  I  am  describing  now  (the  Morrison  Kennel), 
they  may  be  seen  flocking  in  and  out  of  the  brokers’  offices,  examining  the 
stock  books,  talking  wisely  of  the  nation’s  affairs,  each  one  pretending  to 
know  more  of  finance  than  Mr.  Woodbury  himself;  and  their  exuberance  of 
knowledge  is  almost  as  luminously  exhibited.  Like  flies  around  a  honey- 
pot,  each  one  is  anxious  for  a  sip,  and,  according  to  his  slender  means, 
pledges  $100,  more  or  less,  and  orders  his  broker  to  buy  as  many  shares 
as  he  will  upon  this  security.  They  thus  materially  aid  the  great  specu¬ 
lators;  but  the  result  to  themselves,  generally,  is  that  their  families  or 
friends  suffer  precisely  the  amount  they  have  risked.” 


A  new  Merchants’  Exchange  building,  larger  and  finer  than  the  old  one, 
had  been  erected  on  the  entire  block  bounded  by  Wall  and  William  streets, 
Exchange  Place  and  Hanover  Street.  It  is  at  present  occupied  by  the 


NEW  MERCHANTS’  EXCHANGE,  1842.  PRESENT  CUSTOM  HOUSE. 


Custom  House,  and  will  eventually  be  the  home  of  the  National  City  Bank. 
To  this  structure  the  Board  migrated,  in  1842,  leasing  “the  large  hall  over 
the  reading  room,”  on  the  William  Street  side.  The  initiation  fee  had  been 


FROM  JACKSON’S  DAY  TO  THE  CIVIL  WAR 


105 


raised  to  $400,  and  the  Board  was  paying  the  following  yearly  salaries : 
president,  $2,000 ;  secretary,  $1,000 ;  roll  keeper,  $500 ;  sergeant-at-arms, 
$500.  In  the  same  building  met  a  rival  body  of  some  twenty  members, 
known  as  the  Bourse,  or  New  Board.  It  came  to  an  end  in  1848,  most  of 
its  members  having  been  taken  into  the  fold  of  the  New  York  The 
Stock  and  Exchange  Board,  or  Old  Board,  as  it  was  termed.  “New  Board” 
The  members  of  the  latter  had  not  yet  established  a  contin-  taken  m‘ 
uous  market,  but  their  sessions  lasted  from  10:30  in  the  morning  till 
noon,  and  from  2:45  till  3  in  the  afternoon.  At  one  end  of  the  meeting 
room  was  the  rostrum,  at  which  the  president  stood,  gavel  in  hand, 
to  call  the  stocks,  while  the  industrious  secretary,  at  his  side — old  Bernard 
Hart,  who  served  from  1831  till  1854,  the  year  these  quarters  were 
vacated — scribbled  a  record  of  the  transactions.  Two  parallel  rows  of 
massive  columns  ran  lengthwise  through  the  hall,  while  in  the  nave 
stood  a  long  table,  forming  three  sides  of  a  hollow  square,  at  which 
most  of  the  members  had  their  seats.  At  each  side  of  the  room  a  raised 
platform  supported  a  number  of  separate  desks,  also  the  habitations  of 
brokers.  The  members  were  adorned  with  high  stocks,  swallow-tail  coats, 
and  tall  chimney-pot  hats  (of  a  fashion  long  since  departed), 
which  they  frequently  laid  aside  as  they  leaped  from  their  a^adgeof^ 
chairs  with  emphatic  gestures  to  shout  their  bids  and  offers,  vocation. 

In  the  periods  between  sessions  the  brokers  and  the  outside 
operators  formed  an  open-air  crowd  at  the  corner  of  Wall  and  Hanover 
streets,  often  running  into  the  hundreds,  and  adjacent  buildings  re-echoed 
their  clamor  on  active  days. 


IH^gljERTAINLY  no  other  great  nation  is  so  characterized  as  is  our  own 
by  the  rapid  accumulation  of  large  fortunes.  Half  a  century  ago 
the  opportunities  afforded  for  sudden  rise  to  wealth  and  power,  in 
the  absence  of  rigorous  class  distinctions  and  the  existence  of  marvellous 
natural  resources,  were  already  pronounced.  In  1845  the  New  York  *Sha 
office  published  a  list  of  the  property  owners  in  this  city  whose  wealth  was 
valued  at  $100,000  or  more.  The  list  was  headed  by  the  name  of  John 
Jacob  Astor,  who  landed  at  Baltimore,  in  1784,  a  raw  German  youth — his 
chief  possessions  consisting  of  seven  flutes,  which  his  brother  in  London 
had  made — and  who  was  believed  to  have  between  $25,000,000  and 
$50,000,000  at  the  time  the  publication  was  made,  which  was  three  years 
before  his  death.  This  estimate  was  much  too  high.  His  fortune  had  been 
gained  chiefly  in  the  fur  business  on  the  Pacific  Coast,  and  as  he  got  his 
start  with  the  aid  of  capital  furnished  by  his  brother,  Henry — a  rich 
butcher,  established  in  the  Bowery — Henry  Astor  may  be  regarded  as  an 


106 


THE  NEW  YORK  STOCK  EXCHANGE 


associate  founder  of  the  family’s  wealth.  Among  the  items  which  figured 
in  the  list  of  1845  were  these : 


Astor,  William  B.,  son  of  John  Jacob  Astor.  Held  power  of  attorney  for  his 
father;  received  $500,000  from  his  uncle,  Henry,  the  butcher;  his  father 

gave  him  the  Astor  House . 

Belmont,  August.  Born  in  Germany ;  agent  of  the  Rothschilds, 

Wealthy  New  and  a  banker . 

Yorkers  of  1845.  Bishop,  Japhet.  A  hardware  dealer,  and  married  a  daughter 

of  Peter  Lorillard . 

Iron  merchant  and  president  of  the  Council  of  the  Uni- 


In  early  life  an  outdoor  undertaker;  merchant  and  real 


Boorman,  James. 

versity . 

Bowne,  Walter.1 

estate  dealer . 

Brevoort,  Henry,  Jr.  Of  an  old  New  York  family;  his  parents  owned  a  small 
farm  of  about  eleven  acres,  bounded  on  the  south  by  Tenth  Street;  the 
produce  of  this  they  sold  in  the  market;  operated  in  Wall  Street  to  a 

considerable  extent . 

Brevoort,  Henry,  another  branch  of  the  same  family.  Hardware  business ;  made 
fortunate  investments  at  and  near  Cato’s;  twice  Alderman  (Democrat) 

from  Twelfth  Ward . 

Brooks,  Sidney,  son  of  richest  man  in  England,  Peter  Brooks.  Commission 

business . . 

Butler,  Francis.  Of  a  New  York  family,  and  in  the  paint  business;  of  the 

firm  of  Butler  &  Barker;  a  good  fellow . 

Cooper,  Francis.  Director  in  Mechanics’  Bank  for  thirty  years;  treasurer  of 
the  Catholic  Cathedral;  born  in  Germany;  married  two  rich  wives;  no 

children . 

Cromwell,  Charles  T.  “Truly  and  lineally  a  descendant  of  the  great  Sir 

Oliver”;  lawyer . 

Cosby,  William  B.  Nephew  of  the  rich  Colonel  Henry  Rutgers;  inherited  a 
large  estate ;  his  wife,  granddaughter  of  General  William  Ford,  one  of  the 

signers  of  the  Declaration  of  Independence . 

Dawson,  William.  An  Englishman  in  the  broker  line,  and  if  not  worth  this  sum 

himself,  will  inherit  it  through  his  wife,  the  daughter  of  Peter  Jay . 

Delmonico,  Mrs.,  widow  of  John.  John  and  Peter  established  the  celebrated 
French-Italian  restaurant;  natives  of  Switzerland,  on  the  Italian  frontier; 

first  good  restaurant  on  Continental  lines . 

Douglas,  George.  Came  from  Scotland ;  commission  business ;  succeeded  by  two 

sons  and  a  daughter,  Mrs.  Cruger,  leaving  each  $400,000 . 

Draper,  Simeon,  Jr.  He  and  some  eight  or  nine  brothers  distinguished  for 
personal  appearance ;  inherited  from  W.  E.,  of  the  firm  of  Haggerty,  Draper 

&  Jones,  auctioneers . 

Drew,  Daniel.  Has  made  all  his  money;  formerly  kept  the  Bull’s  Head,  and 
is  now  in  the  firm  of  Drew,  Robinson  &  Co.,  large  brokers,  doing  business 
in  this  city  and  Buffalo;  they  are  the  proprietors  of  the  Peoples  Line  of 

steamboats,  between  this  city  and  Albany . 

Field,  Cyrus  W.  A  paper  merchant  in  Burling  Slip,  and  married  an  adopted 

daughter  of  Peter  Lorillard,  by  whom  he  received  a  large  amount . 

Field,  David  Dudley.  From  Massachusetts ;  a  lawyer ;  married  a  rich  woman . 
Field,  Hickson  W.  Formerly  in  lead  business;  built  Burling  Slip;  built  large 
hotel  in  upper  Broadway,  with  Matthew  Morgan;  in  drug  business  in 

Burling  Slip . 

Fish,  Preserved.  Sea  captain  and  shipping  merchant ;  president  of  the  Trades¬ 
men’s  Bank. 


«  t  t  (  «  t  «  M  M  «  U  M  M  !  M 


$5,000,000 

100,000 

500,000 

500,000 

700,000 

1,000,000 

300,000 

500,000 

200,000 

400,000 

100,000 

1,000,000 

200,000 

200,000 

700,000 

100,000 

300,000 

200,000 

150,000 

700,000 

150,000 


1  Walter  Bowne  was  Mayor  of  New  York  from  1829  to  1833. 


FROM  JACKSON’S  DAY  TO  THE  CIVIL  WAR  107 

Forrest,  Edwin.  Distinguished  American  tragedian ;  invested  money  in  uptown 

lots .  $100,000 

Furniss,  William  P.  Made  all  his  money  at  the  South,  and  is  a  broker  in 

Wall  Street;  large  owner  of  real  estate .  100,000 

Gallatin,  Albert.  Swiss  family;  formerly  resided  in  Philadelphia;  was  Secre¬ 
tary  of  the  Treasury;  one  of  the  negotiators  of  the  Treaty  of  Ghent;  for 

a  long  time  president  of  the  National  Bank .  150,000 

Gallatin,  James,  Jr.  Son  of  Albert,  and  president  of  the  National  Bank .  100,000 

Gelston,  Maltby.  A  large  broker  in  Wall  Street .  1,000,000 

Gifford,  Arthur  N.  Educated  as  a  physician;  now  a  Wall  Street  broker .  150,000 

Goelet,  Peter,  son  of  Peter  P.  Goelet.  Resides  with  his  mother  in  the  lower  part 

of  Broadway;  has  received  a  large  legacy  from  England .  400,000 

Goelet,  Alinine,  widow  of  Peter  P .  250,000 

Goelet,  Margaret,  widow  of  Robert  R.  The  latter  and  Peter  P.  made  money  in 
hardware ;  brothers  English ;  both  married  daughters  of  Thomas  Buchanan, 
merchant  in  this  city  prior  to  the  Revolution;  her  only  child,  a  daughter, 

married  Mr.  Kip .  100,000 

Grinnell,  Moses  H.  Shipping;  owner  of  Liverpool  packets;  a  Member  of  Con¬ 
gress  and  a  prominent  politician .  250,000 

Haggerty,  John.  Began  business  as  an  auctioneer;  became  the  richest  auc¬ 
tioneer  in  the  city;  retired  in  1844 .  700,000 

Hamilton,  J.  C.  Son  of  Alexander  Hamilton,  also  his  biographer;  married  a 
daughter  of  the  rich  Dutch  merchant,  Vanderkent  (dead),  and  thereby 

owns  the  American  Hotel;  devoted  to  literary  pursuits .  200,000 

Hammersley,  Lewis  C.  Of  an  old  and  wealthy  New  York  family;  his  father, 

Thomas,  acquired  a  large  fortune  in  dry  goods .  200,000 

Harmony,  Peter.  Shipping  business;  the  ship  “Warsaw”  in  one  voyage  around 

Cape  Horn  made  him  $900,000. . . .  900,000 

Harper  &  Brothers.  Four  brothers,  James  (the  present  Mayor),  John,  Joseph 
W.,  and  Fletcher;  began  as  printers  of  job  work;  began  to  print  books;  an 
immense  business  at  one  time;  considered  the  premier  printing  house  in 

the  United  States .  1,000,000 

Havemeyer,  Frederick  C.  Of  a  German  family;  merchant  in  Front  Street, 

with  brother,  W.  F . 100,000 

Havemeyer,  William  F.1  Merchant .  100,000 

Hoffman,  L.  M.  Of  a  German  family;  his  grandfather  was  a  merchant  and  a 

man  of  talent .  150,000 

Hopkins,  Gilbert.  Of  Hopkins  &  Hawley,  grocers;  Alderman  from  the  Tenth 

Ward;  a  Major-General  of  artillery .  400,000 

Howard,  William.  Treasurer  of  the  New  York  &  Albany  Railroad  Company.  300,000 

Hunt,  Jonathan.  Made  money  as  a  merchant  in  the  South .  1,000,000 

Irving,  Mrs.  John  T.  Judge  John  T.  (dead)  and  Washington  Irving,  the 

author,  were  sons  of  a  shoemaker,  who  had  a  shop  in  William  Street. .. .  300,000 

Janeway,  Rev.  Jacob  I.  His  father,  George  Janeway,2  was  a  brewer,  and  left 

a  large  estate .  500,000 

Jones,  Isaac.  Son  of  Edward  R.,  president  of  the  Chemical  Bank .  250,000 

Jones,  John  C.  Brother  of  Isaac;  also  president  of  the  Chemical  Bank .  250,000 

Kernochan,  Joseph.  Of  a  poor  Irish  family,  who  were  employed  as  colliers, 
teamsters,  etc.,  at  some  of  the  large  iron  works  in  the  Highland  Mountains, 
on  the  west  side  of  the  Hudson;  Joseph  went  to  the  West  Indies  and 

came  back  rich .  400,000 

King,  James  G.  Of  the  firm  of  Prime,  Ward  &  King;  son  of  Rufus  King, 

long  Minister  to  Great  Britain .  200,000 

1  William  F.  Havemeyer  was  Mayor  from  1845  to  1846,  succeeding  Harper,  and  from  1848  to  1849  and 
1873  to  1874. 

2  George  Janeway  was  also  a  quartermaster  in  the  Navy  of  the  Revolutionary  War. 


108  THE  NEW  YORK  STOCK  EXCHANGE 

Knapp,  Sheppard.  In  leather  business  with  Jacob  Lorillard;  president  of  the 

Mechanics’  Bank .  $300,000 

Lafarge,  John.  Made  his  money  in  real  estate  when  agent  for  Joseph 

Bonaparte .  500,000 

Lawrence,  Cornelius  W.1  Auctioneer  and  speculator;  made  and  lost  large  sums.  100,000 
Lenox,  James.  A  third  of  his  present  wealth  was  left  by  his  father,  who  was 
a  British  commissary;  Robert,  brother  of  James,  was  a  cooper,  and  in  busi¬ 
ness  with  Joshua  Jones  at  the  end  of  the  Revolutionary  War .  3,000,000 

Leroy,  Jacob  R.  Broker;  Daniel  Webster  married  his  daughter .  350,000 

Lewis,  Morgan.2  Formerly  Governor  of  the  State ;  acquired  his  estate  by  mar¬ 
rying  Miss  Livingstone .  500,000 

Little,  Jacob.  With  his  brother  constitutes  the  firm  of  Jacob  Little  &  Co.,  and 

one  of  the  richest  brokers  in  Wall  Street .  500,000 

Little,  Edward  B.  Brother  of  Jacob .  500,000 

Lorillard,  Jacob.  Son  of  Jacob,  deceased .  200,000 

Lorillard,  Miss.  Unmarried  daughter  of  Peter .  200,000 

Lorillard,  Mrs.  Widow  of  Jacob .  1,500,000 

Lorillard,  Peter,  Jr.  Son  of  Peter;  tobacco .  1,000,000 

Morgan,  Matthew.  Late  of  New  Orleans .  400,000 

Morris,  Gouverneur.  Son  of  Gouverneur  Morris,  who  married  a  Randolph,  of 

Virginia,  and  left  his  only  inheritor  rich .  1,500,000 

Mott,  Samuel  F.  Cotton  and  commission  business ;  president  of  the  Manhattan 

Fire  Insurance  Company .  400,000 

Mott,  Dr.  Valentine.  Prominent  physician .  250,000 

Munn,  Stephen  B.  Made  fortune  by  selling  buttons,  buying  soldiers’  certifi¬ 
cates;  jobber  in  dry  goods .  800,000 

Paulding,  William.  Mayor;  married  a  Rhinelander .  500,000 

Phelps,  Anson  G.  Hardware  merchant;  owner  of  iron  mines .  1,000,000 

Phelps,  Anson  G.,  Jr.  Son  of  Anson  G .  400,000 

Prime,  Edward.  Son  of  Nathaniel  Prime,  founder  of  Prime,  Ward  &  King. .  300,000 

Rapelye,  G.,  estate  of.  First  Dutch  child  born  on  Long  Island .  500,000 

Rhinelander,  Bernon  and  W.  C.  Each  worth .  200,000 

Roosevelt,  C.  V.  S . . .  200,000 

Roosevelt,  James  I . 150,000 

Schieffelin,  Henry  C.  and  Henry  H.  Drugs ;  each  worth .  200,000 

Schermerhorn,  Abraham  and  John.  Tradesmen,  merchants  and  real  estate; 

each  worth . 500,000 

Stevens,  Robert  L.  Son  of  Colonel  Stevens  (deceased),  of  Hoboken .  350,000 

Stewart,  Alexander  T.  The  celebrated  dry  goods  merchant  of  Broadway, 

whose  shop  is  the  grand  resort  for  the  fashionables .  400,000 

Stewart,  Lispenard.  Real  estate .  500,000 

Stuyvesant,  Peter  B .  2,500,000 

Taylor,  Moses.  Grocer .  300,000 

Thorne,  Herman.  Inherited .  1,000,000 

Townsend,  Isaac.  Dry  goods .  300,000 

Vanderbilt,  Cornelius.  Has  evinced  much  energy  and  go-aheaditiveness  in 

building  and  designing  steamboats .  250,000 

Van  Alen,  James  J.  Inherited  money  made  in  dry  goods .  300,000 

Van  Rensselaer,  Stephen,  estate  of.  In  real  estate .  10,000,000 

Whitney,  Stephen.  Born  in  Connecticut;  began  as  a  retail  liquor  dealer;  then 

wholesale;  speculated  in  cotton  and  real  estate .  10,000,000 

1  Cornelius  W.  Lawrence  was  Mayor  of  this  city  from  1834  to  1837. 

2  Morgan  Lewis,  who  was  graduated  at  Princeton  in  1773,  studied  law  under  John  Jay,  distinguished 
himself  in  the  Revolutionary  War  and  served  as  a  Major-General  in  the  War  of  1812.  He  was  Chief  Justice 
of  the  Supreme  Court  of  New  York  before  being  elected  Governor  in  1804.  He  died  in  April,  1844,  but 
nevertheless  appears  in  the  list. 


FROM  JACKSON’S  DAY  TO  THE  CIVIL  WAR 


109 


SN  the  far  West  there  were  at  work  agencies  destined  to  enlarge  the 
nation’s  domain  and  multiply  its  wealth  and  power.  A  new  expan¬ 
sion  movement  was  in  process  of  generation.  At  the  threshold  of 
the  Union  new  voices  were  heard  demanding  admittance.  Jefferson,  as 
early  as  1804,  had  sent  Meriwether  Lewis  and  William  Clark  to  explore  the 
great  Northwest.  Among  the  first  to  profit  by  the  results  of 
their  expedition  was  John  Jacob  Astor.  In  1811  he  estab-  Newforeesin 

A  .  the  national  life. 

lished  a  trading  post  at  Astoria,  Oregon,  on  the  south  bank 
of  the  Columbia  River,  near  its  mouth,  founding  the  Pacific  Fur  Company. 
Meanwhile,  Zebulon  Montgomery  Pike  had  explored  Colorado  and  the 
Southwest,  and  settlers  had  followed  his  trail  and  had  pushed  on  to 
California.  In  1835  Marcus  Whitman,  a  young  Methodist  missionary,  was 
sent  out  to  Oregon.  Seven  years  later  he  aroused  the  East  with  the  news 
that  England  was  contesting  that  territory  with  us  by  sending  her  sons 
to  colonize  it.  Texas  had  become  independent  of  Mexico  in  1836,  and  still 
had  a  boundary  dispute  with  her.  President  Tyler  negotiated  a  treaty 
with  Texas,  admitting  her  to  the  Union  in  1844,  but  the  Senate  rejected  it. 
In  the  national  campaign  of  that  year  the  stirring  issues  were  Oregon  and 
Texas,  and  the  Democratic  party,  favoring  the  re-occupation  of  the  one  and 
the  annexation  of  the  other,  elected  James  K.  Polk  to  the  presidency,  Clay 
leading  the  Whigs  a  second  time  to  defeat.  The  Oregon  question  and  our 
northwestern  boundary  were  settled  peacefully  with  England.  The  Texas 
dispute  was  settled  by  the  sword. 

Congress  passed,  early  in  1845,  a  resolution  providing  for  the  annexa¬ 
tion  of  Texas.  President  Tyler  approved  it  three  days  before  he  retired. 
His  successor,  Polk,  claimed  the  territory  between  the  Nueces  River  and  the 
Rio  Grande,  which  was  the  subject  of  the  Texas-Mexico  dispute,  and  ordered 
General  Zachary  Taylor  to  occupy  it.  The  Mexican  forces 
crossed  the  Rio  Grande  in  May,  1846,  and  precipitated  the  The^Mexican 
war  by  attacking  Taylor’s  troops  at  Palo  Alto,  after  General 
Ampudia  had  vainly  endeavored  to  persuade  him  to  retire  beyond  the 
Nueces  “while  our  governments  are  regulating  the  pending  question  in 
relation  to  Texas.”  Ampudia  was  succeeded  by  General  Arista,  who 
commanded  6,000  Mexican  troops  at  the  battle  of  Palo  Alto.  Taylor 
defeated  them  with  2,300  men,  followed  them  up  the  next  day,  and  in  a 
second  battle  drove  them  back  across  the  Rio  Grande.  The  war  was  one 
chain  of  American  successes.  The  victory  of  Resaca  de  la  Palma  preceded 
the  taking  of  Monterey  and  the  famous  repulse  at  Buena  Vista  of  Santa 
Anna,  who  had  a  force  four  times  as  large  as  Taylor’s.  These  triumphs 
contributed  to  the  popular  enthusiasm  that  was  to  raise  Taylor  to  the 
presidency.  Winfield  Scott,  the  hero  of  Chippewa  and  Lundy’s  Lane, 
now  the  general  commanding  the  army  of  the  United  States,  landed  at 


110 


THE  NEW  YORK  STOCK  EXCHANGE 


Yera  Cruz  with  12,000  men  in  March,  1847,  and  began  a  historic  march 
of  two  hundred  miles  to  the  City  of  Mexico,  inflicting  one  defeat  after 
another  upon  an  enemy  whose  numbers  exceeded  his  own,  and  who  often 
fought  from  ambush.  He  climbed  rough  mountains  from  which  Mexican 
cannon  bellowed  a  protest  against  his  persistence,  and  marked  his  hazard¬ 
ous  route  with  the  corpses  of  victims  which  fever  and  the  sharp-shooter 
selected  from  his  own  army.  San  Juan  de  Ulua,  Cerro  Gordo, 
Chapuitepec  Puebla  and  Churubusco  bore  witness  to  American  generalship 
and  pluck,  and  at  length,  on  December  13th,  Scott  stormed 
the  famed  fortress  of  Chapuitepec.  The  next  day  saw  his  troops  enter 
Mexico  City  and  raise  their  flag  above  “the  halls  of  the  Montezumas.” 
The  power  of  Mexico  was  broken. 

California  and  New  Mexico  had  been  settled  by  Americans,  though 
somewhat  thinly.  The  population  of  the  one  issued  a  declaration  of  inde¬ 
pendence,  hoisting  the  standard  of  the  Bear  State,  while  the  territory  of 
the  other  was  invaded  by  the  forces  of  Col.  Stephen  W.  Kearny,  who 
captured  Santa  Fe,  and  proclaimed  the  whole  country  the  property  of  the 
United  States.  The  war  had  been  bitterly  opposed  by  many  Americans 
who  believed  that  we  were  stealing  Mexican  soil.  Whatever  may  have  been 
the  merits  of  our  case  at  the  outset,  we  acted  with  some  sense  of  moral 
obligation  in  the  final  settlement.  By  the  treaty  of  Guadalupe  Hidalgo, 
Mexico  received  $15,000,000  for  surrendering  the  disputed  Texas  terri¬ 
tory,  with  New  Mexico  and  upper  California,  besides  being  relieved  of  the 
payment  of  $3,500,000  in  American  claims.  In  1853  she  sold  us  the 
Masilla  Valley  and  a  part  of  Arizona  and  New  Mexico  for  $10,000,000. 

Taylor  was  elected  President  in  1848,  as  the  Whig  candidate,  defeating 
Lewis  Cass,  the  Democratic  nominee,  and  Martin  Van  Buren,  the  standard 
bearer  of  the  Free  Soil  party,  which  demanded  that  slavery  should  not  be 
further  extended.  The  Union  now  contained  fifteen  slave  and  fifteen  free 
States.  The  agitation  of  the  abolitionists  was  continually  growing  and 
the  murmur  of  the  South  was  already  swelling  into  a  menace  of  secession. 


AMUEL  F.  B.  MORSE  had  perfected  the  telegraph  and  patented  his 
invention  just  before  the  outbreak  of  the  Mexican  War.  The  first 
message  over  the  wire  laid  between  Baltimore  and  Washington  was 
sent  on  May  27, 1844.  Morse  had  to  make  many  a  legal  fight  over  patents 
before  reaping  the  full  fruits  of  his  genius.  The  country  welcomed  the  new 
means  of  communication  as  a  powerful  agent  of  commercial 

Btoc^ticker1141  Progress*  Its  value  in  the  facilitation  of  Stock  Exchange 
business  calls  for  no  comment,  but  it  is  worth  noting 
that  the  introduction  of  stock  tickers  in  this  city  did  not  take  place 


FROM  JACKSON’S  DAY  TO  THE  CIVIL  WAR 


111 


Rush  of  the 
forty-niners. 


until  1867. 1  A  new  spur  to  business  activity  was  the  discovery  of  gold  in 
California  by  one  Marshall.  This  occurred  in  a  mill  race  on  the  property  of 
his  employer,  Captain  J ohn  Augustus  Sutter,  whose  laborers  deserted  him 
to  prospect  for  themselves,  while  gold  diggers  overran  and  preempted  his 
lands,  which  he  never  succeeded  in  recovering.  Sutter  finally  got  an  annual 
allowance  of  $3,000  from  the  State  as  indemnity.  Native  California  gold 
was  first  deposited  with  the  United  States  Mint  in  December,  1848,  and  the 
following  year  the  famous  rush  of  the  gold  seekers  to  the  West  began. 

Political  conditions  in  Europe  were  of  a  nature  to  encourage  emigra¬ 
tion.  The  glimmer  of  precious  metal  in  California  proved  a  tempting  lure 
to  the  German  radical,  discouraged  by  the  failure  of  the  revolutionary 
movement  at  home  and  despairing  of  political  progress.  It  attracted  the 
children  of  famine-stricken  Ireland;  and  while  persuading  dissatisfied 
Europeans  that  their  opportunity  had  come  to  escape  old 
misfortunes  and  obtain  a  new  happiness,  it  was  powerfully 
effective  in  tempting  the  citizens  of  our  Eastern  States  to  turn 
their  faces  to  the  West.  California,  before  long,  became  the  Mecca  for  the 
hardy  spirits  among  the  gold  worshippers  of  the  world.  Chinese,  Mexicans, 
and  South  Americans  swelled  their  number.  The  brig,  the  steamship,  and 
the  prairie  schooner  conveyed  them  to  the  shrine.  In  the  harbor  of 
San  Francisco  lay  decaying  hulks  that  had  sailed  under  all  flags,  and  had 
finished  their  last  voyages  in  entering  the  Golden  Gate,  since  the  tars  who 
had  manned  the  yards  yielded  to  the  temptation  as  soon  as  their  feet 
touched  dry  land,  and  joined  the  search  for  pay  dirt.  The  travellers  who 
came  across  the  continent  were  carried  by  rail  only  to  the  Missouri  River, 
and  made  their  wr ay  farther  West  as  best  they  could.  Thousands  succumbed 
to  the  hardships  and  privations  which  accompanied  the  mad  rush  to  the 
gold  fields.  The  venture  meant  fortune  to  one  and  death  to  another. 

California  produced  $10,000,000  worth  of  gold  in  1848.  Her  produc¬ 
tion  in  1849  amounted  to  $40,000,000,  and  in  the  next  ten  years  to  the 
enormous  value  of  $555,000,000.  This  astonishing  increase  in  the  bulk 
of  our  wealth  began  a  new  era  of  speculation,  while  the  growth  of 
California’s  population  induced  her  to  demand  admission  to  statehood. 
She  came  in  as  a  free  State  on  September  9,  1850 — just  two 
months  after  the  death  of  Taylor  and  the  succession  of  Go^  discoveries 
Millard  Fillmore  to  the  presidency— Texas  receiving  her  speculation, 
present  boundaries  and  the  sum  of  $10,000,000  for  relinquish¬ 
ing  certain  land,  and  New  Mexico  and  Utah  being  organized  as  Territories. 
The  passage  of  an  effective  fugitive  slave  law,  which  “  made  every  man  a 
slave  catcher,”  completed  the  compromise,  rendering  California’s  admission 
possible.  This  compromise  left  the  question  of  slavery  in  the  new  Terri- 

1  See  Mr.  Hotchkiss’s  article  on  “The  Stock  Ticker,”  in  this  volume. 


112 


THE  NEW  YORK  STOCK  EXCHANGE 


tories  to  take  care  of  itself  until  such  time  as  they  should  ask  to  be 
admitted  as  States,  when  their  respective  constitutions  were  to  settle  it. 
The  Democrats  endorsed  the  agreement  in  1852,  and  condemned  the  efforts 
of  Abolitionists.  They  succeeded  in  electing'  Franklin  Pierce  as  President, 
decisively  defeating’  the  Whig  standard  bearer,  Winfield  Scott. 

The  first  year  of  Pierce’s  administration  saw  the  establishment  of  the 
New  York  Clearing  House.  This  city  possessed  a  population  of  more 
than  500,000  persons,  and  a  flourishing  bank  system  at  the  time.  Albert 
Gallatin,  former  Secretary  of  the  Treasury,  had  published,  in  1841,  a 
pamphlet  entitled,  “Suggestions  on  the  Banks  and  Currency  of  the  Several 


STOCK  BOARD  BOOM  IN  THE  MERCHANTS’  EXCHANGE,  1851, 


United  States  in  Reference  to  Specie  Payments,”  in  which  he  advocated  the 
establishment  of  what  he  called  a  “general  cash  office.”  In  1853  Francis 
W.  Edmonds  followed  out  Gallatin’s  suggestion  by  securing  the  organiza¬ 
tion  of  the  Clearing  House.  A  meeting  of  New  York  bank 
Establishment  officers,  in  response  to  the  call  of  the  Mechanics’  Bank,  of 
Clearing-House,  which  Mr.  Edmonds  was  cashier,  was  held  on  August  23d,  and 
he  became  the  chairman  of  the  first  Clearing  House  Committee, 
his  associate  committeemen  being:  James  Punnett,  cashier  of  the  Bank  of 
America;  Augustus  E.  Silliman,  cashier  of  the  Merchants’  Bank;  John  L. 
Everett,  cashier  of  the  Broadway  Bank;  Richard  Berry,  cashier  of  the 
Tradesmen’s  Bank,  and  R.  S.  Oakley,  secretary.  On  October  3d  the  base- 


FROM  JACKSON’S  DAY  TO  THE  CIYIL  WAR 


113 


ment  of  No.  14  Wall  Street  was  obtained  for  the  new  institution.  The  first 
exchanges,  amounting  to  $22,648,109.87,  took  place  on  October  11th,  the 
balances  for  the  day  aggregating  $1,290,572.38.  All  the  fifty-one  banks 
of  the  city  joined  the  Clearing  House  Association,  of  which  the  first  chair¬ 
man  was  Thomas  Tileston.  George  D.  Lyman  was  its  first  manager. 


country  had  entered,  with  the  discovery  of  gold  upon  the 
m  m  Sacramento,  into  another  period  of  speculation  and  extravagant 
expenditure.  As  illustrated  by  the  ordinary  citizen  of  the  day,  the 
public  disposition  appeared  to  be  toward  making  income  exceed  outgo  by 
as  large  a  sum  as  the  wine  merchant,  the  grocer,  and  the  dry  goods  dealer 
would  permit.  Men  consumed  not  only  all  they  could  pay  for  but  all  they 
could  get  credit  for.  As  illustrated  by  the  financial  world,  , 

the  tendency  seemed  to  be  toward  the  overbuilding  of  rail-  extravagance 
roads.  Both  these  kinds  of  imprudence  were  wonderfully  and  the  mania 
fostered  by  California’s  addition  to  our  store  of  wealth.  They 
combined  to  produce  a  buoyant,  superficial  prosperity  for  eight  years,  and 
then  to  bring  about  the  frightful  crash  of  1857.  Yet  that  disaster  did  not 
quite  head-off  the  railroad  building  movement  that  began  in  1849.  This 
required  the  Civil  War  to  check  it.  The  greatest  railroad  year  prior  to 
1849  had  been  1841,  when  our  aggregate  mileage  was  increased  by  717. 
In  1849  the  increase  was  1,369  miles.  The  total  of  railroad  tracks  in  this 
country  leaped  from  5,996  miles,  at  the  end  of  1848,  to  22,016  miles  by  the 
end  of  1856,  in  which  year  the  movement  reached  its  height,  and  to  30,635 
miles  by  the  end  of  1860.  The  construction  of  these  metal  highways  was 
aided  by  Government  favor,  and  the  policy  of  giving  public  lands  to  their 
projectors  was  initiated  by  the  grants  of  1,000,000  acres  to  the  Mobile  & 
Ohio,  and  of  2,595,000  acres  to  the  Illinois  Central. 

In  1852  H.  G.  Stebbins,  who  had  succeeded  Mr.  Clarkson  as  president 
of  the  New  York  Stock  and  Exchange  Board  in  the  previous  year,  was  him¬ 
self  succeeded  by  C.  R.  Marvin. 

Disturbances  in  the  stock  market,  and  the  discovery  of  various  exten¬ 
sive  frauds  antedated  the  panic  of  1857,  and  appeared  to  give  warning  of 
the  approaching  calamity.  The  year  1853  was  marked  by  a  notable  depre¬ 
ciation  in  stock  values,  due  to  the  sudden  calling  of  the  large  outstanding 
bank  loans,  upon  the  advent  of  a  general  feeling  of  distrust, 
which  latter  was  in  turn  due  to  a  throwing  over  of  our  secu¬ 
rities  by  English  bankers,  and  the  necessity  of  paying  the 
Government  duties  on  heavy  importations.  The  following  year  saw  the 
issuance,  by  Robert  Schuyler,  president  of  the  New  York  &  New  Haven 
Railroad,  of  fraudulent  stock  of  that  road  to  the  amount  of  $1,900,000, 


Market  frauds 
in  the  fifties. 


114 


THE  NEW  YORK  STOCK  EXCHANGE 


Stock  and 
Exchange  Board 
changes. 


while  Alexander  Kyle,  secretary  of  the  New  York  &  Harlem  Railroad 
Company,  issued  some  3,000  shares  of  forged  stock  of  the  latter  corpora¬ 
tion.  This  was  also  the  year  in  which  the  modern  Republican  party  was 
founded,  uniting  the  Northern  Whigs,  Free  Soilers,  and  many  of  the  Anti- 
slavery  Democrats.  The  New  York  Stock  and  Exchange  Board  removed, 
in  1854,  from  the  Merchants’  Exchange  building,  to  the  old  Corn  Exchange 
Bank  building,  at  William  and  Beaver 
streets,  on  the  site  of  the  present  struc¬ 
ture  of  the  same  name,  but  left  these 
new  quarters  in  1856  for  a  large  room 
in  the  Lord’s  Court  building,  with  en¬ 
trances  at  No.  25  William  Street,  No. 

53  Beaver  Street,  and  No.  50  Exchange 
Place.  Annual  dues  of  $50  were  now 
established.  The  presi¬ 
dency  was  made  a  position 
without  salary,  but  the 
sum  of  $2,500  a  year  was 
voted  to  the  first  vice-president,  who  was 
to  preside  at  the  first  board,  or  morning 
call,  while  a  second  vice-president,  with 
a  yearly  salary  of  $1,500,  was  chosen 
to  preside  at  the  second  board,  or  after¬ 
noon  call.  Neither  vice-president  could 
deal  while  presiding.  Applicants  for 
membership  were  voted  for  at  the  regular  call,  three  black  balls  being  suffi¬ 
cient  for  rejection. 

The  Democratic  party  defeated  the  Republicans  in  1856,  James 
Buchanan  triumphing  over  John  C.  Fremont.  The  nation  eagerly  con¬ 
tinued  to  speculate  and  to  consume,  while  slaveholders  and  abolitionists 
flung  expletives  at  one  another,  and  the  quarrel  waxed  hot  in  “bleeding 
Kansas.”  On  December  5th  old  Jacob  Little,  the  hero  of  a  hundred  con¬ 
flicts  which  he  had  personally  led  in  the  securities  arena,  scored  his  third 
failure,  with  commitments  estimated  at  $10,000,000  and 
actual  losses  of  about  $1,000,000.  He  was  short  of  Erie  to 
the  extent  of  from  100,000  to  150,000  shares,  and  though  his 
judgment  of  the  property  was  undoubtedly  sound,  the  tide  of  bull  specula¬ 
tion  swept  him  off  his  feet.  He  had  always  proved  a  generous  victor,  and 
now  found  mercy  at  the  hands  of  his  creditors,  who  consented  to  settle  with 
him  on  the  basis  of  the  day’s  quotations.  “It  is  understood,”  said  a 
contemporaneous  print,  “that  Mr.  Little  continued  his  ordinary  operations 
yesterday,  notwithstanding  his  suspension.  Probably  in  a  fortnight’s  time 


CORN  EXCHANGE  BANK  BUILDING,  1854. 


Jacob  Little’s 
third  failure. 


FROM  JACKSON’S  DAY  TO  THE  CIVIL  WAR 


115 


Signals  of 
disaster. 


the  whole  affair  will  blow  over.  Nothing  but  the  final  conflagration  will 
put  an  end  to  Wall  Street  speculations  and  Wall  Street  swindles.  An  ordi¬ 
nary  earthquake  does  not  trouble  the  operators  at  all.”  The  blow  so 
weakened  Jacob  Little  &  Co.  that  they  failed  again,  on  August  26,  1857, 
two  days  after  the  collapse  of  the  gigantic  Ohio  Life  Insurance  and  Trust 
Company,  due  to  the  reckless  making  of  loans  and  to  official  frauds,  which 
shocked  all  financial  America.  Mr.  Little’s  fourth  failure  was  laid  chiefly  to 
his  overpurchasing  of  stocks  on  sellers’  option. 

Although  the  great  Ohio  corporation’s  fall  was  the  real  beginning  of 
disaster,  the  downward  tendency  of  prices  since  January,  1857,  had  shown 
a  general  undermining  of  public  confidence.  There  seemed  to  be  a  growing 
impression  that  prosperity  did  not  rest  on  so  sound  a  basis  as  had  been 
imagined.  Such  watering  of  stock  as  was  illustrated  by  the  Erie  Railroad, 
the  capital  of  which  had  risen  from  $3,000,000  to  $38,000,000,  without 
apparent  good  cause,  while  its  directors  were  eager  to  aggravate  the  situa¬ 
tion  by  declaring  a  stock  dividend,  had  given  food  for  thought.  A  portion 
of  the  daily  press  all  through  the  year  pointed  out  the  danger 
signals,  only  to  be  repaid  for  its  forethought,  when  the  crash 
came,  by  the  preposterous  charge  of  having  maliciously 
brought  it  about.  If  a  newspaper  had  demonstrated  that  mismanagement 
or  gross  inflation  characterized  a  certain  railroad,  the  friends  of  the  latter 
heaped  curses  on  the  heads  of  the  scribes  when  the  end  came,  and  the  ill- 
treated  directors  sat,  ruefully,  amid  the  ruins  of  their  property.  But  the 
newspapers  no  more  produced  the  disaster  than  a  sentinel  causes  the 
approach  of  the  foe,  of  whom  he  gives  warning. 

Leonard  W.  Jerome,  who  had  formed  a  partnership  in  1856  with 
William  R.  Travers,  was  engaged  in  a  bear  campaign,  in  the  summer  of  1857, 
particularly  on  Michigan  Southern  Railroad  shares.  He  was  standing  on 
the  pavement,  near  the  old  Stock  Exchange,  toward  the  end  of  June,  venting 
his  pessimistic  opinions,  when  a  broker  challenged  him  to  attack  the 
standing  of  the  big  Ohio  company.  “ What’s  Ohio  Life  and  Trust?” 
inquired  Jerome.  He  was  informed  of  the  quotation — 103.  “I’ll  sell  a 
thousand  at  fifty,  seller  one  year,”  he  exclaimed.  “  Take  ’em,” 
shouted  his  interlocutor.  On  August  24tli,  about  twro  months  A  l’old  venture 

0  A  i  ,,  and  its  success. 

later,  the  Ohio  Life  Insurance  and  Trust  Company  descended 

into  bankruptcy,  paving  the  way  for  hundreds  of  other  failures.  It  could 

not  realize  upon  its  loans  when  its  depositors  forced  it  to  call  them  in. 

“No  man,  no  community,  no  nation,”  said  Horace  Greeley,  in  the 
Tribune,  two  days  later,  “can  afford  to  buy  and  consume  more  than  it 
produces  for  sale  and  sells.  .  .  .  The  farmer  whose  store  bill  is  $500 

a  year,  while  he  turns  off  but  $300  worth  of  produce,  may  be  a  capital 
financier,  and  have  a  choice  farm  and  good  backers  and  excellent 


116 


THE  NEW  YORK  STOCK  EXCHANGE 


credit,  .  .  .  but  all  these  things  cannot  save  him  from  bankruptcy 

unless  he  mends  his  hand.  .  .  .  One  of  the  two  things  we  must  do  — 

either  stop  wearing  so  many  silks  and  drinking  freely  such  capital  wines, 
or  we  must  produce  them  at  home,  or  produce  a  great  deal  more  withal  to 
pay  for  them.  And  we  do  not  believe  the  producing  a  great  deal  more  of 
our  present  staples  is  a  practicable  alternative.” 

The  liabilities  of  the  Ohio  Life  Insurance  and  Trust  Company  here  and 
at  its  headquarters,  Cincinnati,  reached  about  $5,000,000.  From  this 
period  a  descending  market,  frightful  contractions  of  loans  by  the  banks, 
tottering  credit,  failing  merchants  and  brokers,  slaughtered  staples,  unem¬ 
ployed  workmen,  and  evicted  tenants,  marked  the  progress  of 
Panic  of  1857.  caiamity  all  over  this  country.  It  was  at  its  worst  in  New 
York,  where  20,000  men  and  women  were  thrown  out  of  work  in  a  fort¬ 
night.  On  October  13th  eighteen  banks  in  this  city  suspended  specie 
payment.  They  were  followed  by  all  other  banks  in  the  State  except  the 
Chemical,  by  the  banks  of  New  England,  and  by  many  throughout  the 
country,  the  South  as  a  whole  escaping  the  pestilence  of  bankruptcy.  “  The 
loafers  in  10,000  bar  rooms,”  said  Greeley,  on  October  15th,  “who  are 
to-day  cursing  the  banks  as  broken,  have  themselves  caused  whatever  there 
may  be  of  bank  insolvency  by  buying  food  and  clothes  for  their  families  at 
the  neighboring  stores  and  not  paying  for  them  when  required.”  It  was 
strong  language  to  use  to  an  exasperated  public,  but  not  altogether 
unjustified. 

Eventually  the  force  of  the  malady  spent  itself.  The  patient  seemed  to 
obtain  relief.  The  market  rose  with  renewed  life  at  the  very  moment  that 
specie  payment  was  suspended.  To  the  shaking  out  of  false  credits,  to  the 
shock  succeeding  the  failure  of  the  Michigan  Southern,  Illinois  Central,  and 
Erie  railroads,  and  the  general  spread  of  mercantile  gloom,  ensued  more 
healthy  conditions,  under  which  business  could  be  begun  anew.  The  banks 
of  New  York  resumed  payment  on  December  12th.  With  marvellous 
recuperative  powers  the  nation  again  took  up  the  task  of  making  a  living. 
Its  prudence  might  fail  or  its  experience  prove  inadequate  at  times;  its 
vitality  no  setback  could  impair ;  its  pluck  no  obstacle  could  resist.  The 
three  years  that  followed  were  years  of  great  productiveness,  and  when  the 
terrible  ordeal  of  civil  strife  drew  near,  the  country  was  prepared  to  meet  it. 

Some  idea  may  be  obtained  of  the  slaughter  of  values  in  the  panic  by  a 
contrast  of  the  prices  of  January  5,  1857,  with  those  on  the  morning  of 
October  13th,  before  the  news  of  the  suspension  became  generally  known. 

On  January  5th  Virginia  sixes  sold  up  to  90%,  and  other 
prices  were:  New  York  Central,  95;  Ohio  sixes,  102%;  Dela¬ 
ware  &  Hudson  Canal,  118% ;  Cumberland  Coal,  17% ;  Pacific 
Mail,  67 ;  Erie,  63% ;  Reading,  89 ;  Michigan  Southern,  90 ;  Cleveland  & 


A  striking  con¬ 
trast  in  prices. 


FROM  JACKSON’S  DAY  TO  THE  CIVIL  WAR 


117 


Toledo,  79;  Chicago  &  Rock  Island,  96%;  Pennsylvania  Coal,  102;  Illinois 
Central,  125%.  At  the  first  board,  on  October  13th,  these  sales  took  place : 

Securities.  Price. 

7,000  Virginia  sixes,  cash,  . . 661 

12,000  Virginia  sixes,  cash, . 67 

4,000  Illinois  Central  bonds, . 51 

50  Bank  of  Commerce, . 71 

5  Metropolitan  Bank, . 58 

6  Metropolitan  Bank, . 571 

20  Metropolitan  Bank, . 57 

100  Reading,  s  3, . 281 

500  Reading,  s  3, . 29 

200  Reading,  s  3, . 29 

200  Cumberland  Coal, . 5§ 

33  Cumberland  Coal,  . . 51 

3,000  New  York  Central  sixes, . 64 

1,000  New  York  Central  sixes, . 641 

10  New  York  Central  stock, . 53 

100  New  York  Central,  b  3, . 52J 

235  New  York  Central,  cash, . 521 

225  New  York  Central,  cash, . 52§ 

100  New  York  Central,  s  2, . 52f 

100  New  York  Central,  s  3, . 521 

20  Harlem  Railroad, . 6 

115  Galveston  &  Chicago  Railroad, . 53 

55  Galveston  &  Chicago  Railroad, . 531 

56  La  Crosse  &  Milwaukee, . 5f 

3,000  Erie  second  mortgage  bonds, . 56 

5,000  Erie  consolidated  bonds,  71, . 18 

11  Erie  common,  .............  8 

20  American  Exchange  Bank, . 55 

5  American  Exchange  Bank, . 541 

5  Commonwealth  Bank, . 60 

25  Canton  Company,  .  . 13 

19  Delaware  &  Hudson, . 78 

31  Delaware  &  Hudson, . 77 

15  Delaware  &  Hudson, . 76 

323  Delaware  &  Hudson, . 75 

20  Michigan  Central  Railroad, . 35 

22  Panama  Railroad, . 60 

10  Cleveland,  Columbus  &  Cincinnati, . 711 

35  Chicago  &  Rock  Island,  cash, . 55 

50  Chicago  &  Rock  Island,  cash,  . . 551 

25  Chicago  &  Rock  Island, . 551 

100  Chicago  &  Rock  Island,  b  60,  .  »  .  .  .  .  60 

300  Chicago  &  Rock  Island,  b  60,  . . 61 

300  Chicago  &  Rock  Island,  b  60, . 62 

25  Cleveland  &  Toledo,  cash, . 22 

150  Cleveland  &  Toledo,  cash, . . 21 

20  Cleveland  &  Toledo,  cash, . . . 98 

15  New  Jersey  Railroad,  201 


On  October  13th  New  York  sixes  sold  at  from  89%  to  90,  and  fives  of 
1874  at  75%  to  75%,  and  fives  of  1858  at  85  and  86;  Michigan  sixes  at 


118 


THE  NEW  YORK  STOCK  EXCHANGE 


74  and  74% ;  Missouri  sixes  at  59  and  60,  and  California  sevens  at  55. 1  The 
Stock  Exchange  recovered  bravely  from  the  shock.  In  May,  1858,  it 
increased  its  initiation  fee  to  $ 1,000,  with  the  proviso  that  upon  the  admis¬ 
sion  of  any  broker’s  clerk  of  three  years’  standing,  only  the  sum  of  $500 
should  be  required. 

In  conclusion,  it  should  be  noted  that  one  of  the  radical  causes  of  the 
general  calamity  had  been  the  irresponsible  system  of  bank-note  issues, 
especially  of  those  put  forth  by  “wildcat”  institutions  of  the  West.  In 
frontier  States,  the  managers  of  these  concerns  were  permitted  to  seclude 
themselves  and  to  flood  the  country  with  notes  that  with  difficulty  could 
be  presented  for  redemption.  A  large  proportion  of  this  currency  circu¬ 
lated  in  the  East  at  from  five  to  fifteen  per  cent,  discount,  and  every  trades¬ 
man,  every  shopper,  was  accustomed  to  consult  “Thompson’s  Bank  Note 
Reporter”  before  tendering  or  accepting  a  western  bank-note.  The 
amelioration  of  this  condition  was  no  small  compensation  for  the  havoc 
which  it  had  aided  to  beget.  Six  years  afterward,  as  will  be  seen,  the 
creation  of  the  present  National  Bank  system  was  to  make  the  reform 
complete. 

1  The  scenes  in  Wall  Street,  at  the  height  of  the  panic  of  1857,  as  recalled  by  still  living  narrators,  were 
more  dramatic  and  spectacular  than  any  that  have  since  been  witnessed,  excepting  those  of  “Black 
Friday”  in  1869.  On  the  morning  of  October  13th,  the  Street  was  choked  up  by  the  excited  throng  of 
depositors.  The  venerable  David  Leavitt,  a  director  and  former  president  of  the  American  Exchange  Bank, 
standing  at  the  entrance  to  that  institution,  with  his  gray  head  uncovered,  addressed  the  people  in  a  vain 
attempt  to  assuage  their  alarm.  Meanwhile  securities  were  selling  for  half  their  actual  values  at  public 
auction  in  the  rotunda  of  the  Merchant’s  Exchange  across  the  way.  The  present  writer  made  his  first 
financial  venture,  buying  100  shares  of  American  Exchange  Bank  stock  at  less  than  50,  and  paying  for  it 
in  gold  withdrawn  the  day  before  from  that  very  bank.  So  quick  was  the  relief  that  followed  the  ensuing 
suspension  of  specie  payments  that  within  a  few  days  the  market  price  of  the  stock  thus  bought  advanced 
to  88.  During  the  interval  of  suspension,  from  October  13th  to  December  12th,  the  price  of  gold  never 
rose  above  105. 


E.  C.  S. 


VIII 

SECESSION 

ODERN  stock  speculation,  as  already  has  been  said,  arose 
with  the  beginning  of  the  Civil  War.  It  was  really  started 
by  the  conditions  of  internecine  strife.  The  effect  of  the 
fiscal  policy  adopted  by  the  Government  at  the  outbreak  of 
hostilities  lasted  for  years  after  the  end  of  the  actual  con¬ 
flict,  and,  meanwhile,  a  new  order  of  speculation  had  become 
so  well  established  that  it  no  longer  needed  the  fluctuating  values  of 
national  credit,  or  the  extravagant  spirit  of  army  contractors  grown 
suddenly  rich,  to  insure  its  continuance. 

There  were  two  distinct  phases  of  Wall  Street  activity  in  the  sixties, 
and  both  were  epoch-making.  One  was  the  speculation  in  gold,  or,  to  be 
scientifically  exact,  the  speculation  in  greenbacks,  which  the 
Government  unwillingly  provided  for  by  its  legal  tender  ^pg^^on863 
enactments  and  afterward  made  various  futile  endeavors  to  in  the  sixties, 
check.  The  other  was  the  struggle  of  a  few  strong  men  for 
railroad  supremacy,  a  struggle  which,  of  course,  involved  thousands  of 
lesser  men,  but  was  none  the  less  the  work  of  the  few.  It  formed  a  sharp 
contrast  to  the  railway  mania  of  the  previous  decade,  when  merchants, 
manufacturers,  professional  men,  practically  every  one  who  had  capital  to 
invest,  purchased  the  shares  of  the  new  steel  highways  (and  frequently 
hypothecated  the  stock  in  order  to  be  able  to  carry  it),  wdiile  promoters  of 
the  enterprises  were  paying  big  commissions  to  market  their  bonds  at  any 
necessary  discount.  This  condition  of  things  was  largely  wiped  out  by  the 
panic,  and  there  gradually  appeared  in  its  place  a  greater  concentration  of 
railroad  capital  than  had  existed  theretofore.  Large  holders  of  securities 
w'ere,  of  course,  not  wanting  before  the  War  of  the  Rebellion.  It  was  at 
that  period,  however,  that  they  first  met  in  battle  royal.  Daniel  Drew,  for 
example,  had  been  a  director  of  the  New  York  &  Erie  Railroad  since  1852, 


120 


THE  NEW  YORK  STOCK  EXCHANGE 


a  year  after  its  completion  and  the  consequent  annihilation  of  tolls  on 
the  Erie  Canal,  and  he  did  not  fail  to  reap,  in  the  stock  market,  the 
advantages  of  his  position,  winning,  at  length,  the  title  of  the  “Speculative 
Director.”  But  his  greatest  prominence,  and  his  impressive 
Titans  encounters  with  Cornelius  Vanderbilt,  Jay  Gould,  and  James 

Fisk,  Jr.,  were  all  subsequent  to  1860.  The  famous  Erie 
litigation,  in  which  these  men  were  participants,  replete  with  incidents  of 
the  most  dramatic  character,  accompanied  by  conflicts  that  imperilled  even 
the  great  fortunes  of  the  fighters,  and  stained  by  such  corrupt  and  open 
bargainings  with  the  judiciary  as  the  moral  sense  of  the  community  to-day 
would  not  tolerate  for  a  moment,  is  part  of  post  bellum  history. 


STOCK  EXCHANGE  FLOOR.  LORD’S  COURT.  1862. 


The  two  great  phases  of  speculation  in  the  decade  between  1860  and 
1870  were  both  fruitful  of  manipulations  brilliant  and  unscrupulous. 
Events  of  this  period  make  instructive,  if  not  edifying,  reading.  It  strikes 
one  as  curious  that,  so  short  a  while  ago,  a  Supreme  Court 
uln^hfthT*11"  Judg’e  found  it  advisable  to  explain  from  the  bench  that 
sixties.  certain  of  his  decisions  were  not  due  to  his  own  interests  in 

stock  speculations,  and  that  recognized  leaders  of  the  market 
had  to  flee  from  the  violence  threatened  by  its  participants.  No  one 
pretends  that  stock- watering  or  stock-jobbing  has  died  and  been  buried 
since  then,  but  we  certainly  have  a  greater  respect  for  public  opinion  now, 
and  a  little  more  regard  for  the  amenities  of  life.  A  few  years  ago  a  large 
proportion  of  New  York’s  intelligent  citizens  were  in  a  rage,  and  indigna- 


SECESSION 


121 


tion  meetings  were  addressed  by  our  leading  orators,  because  a  Supreme 
Court  Judge  of  acknowledged  capacity  had  failed  of  re-nomination  through 
refusing  to  bestow,  in  accordance  with  the  desires  of  his  party  managers, 
the  patronage  within  his  control. 

The  decade  in  question  has  a  fair  claim  to  being  the  most  striking,  and 
possibly  the  most  important,  in  the  history  of  speculation  in  this  city.  It 
will  be  found  expedient  to  discuss  the  two  phases  of  the  era  separately, 
except  where  they  meet  and  are  entwined.  Both  were  powerfully  promoted 
by  the  war  conditions,  which  not  only  directly  originated  the  A  decade  of 
Gold  Room,  but  fostered  a  gambling  spirit  that  revivified  the  great  speculative 
railway  market,  and  gave  Vanderbilt,  Drew,  and  their  com-  imP°rtance- 
peers  a  fit  arena  for  trials  of  strength.  But  let  us  glance  for  a  moment  at 
the  commercial  and  political  forces  which  finally  culminated  in  the  war. 


m 


jjOHN  C.  CALHOUN,  in  his  last  address  to  the  Senate — which  was  read 
for  him  by  a  fellow  Senator  on  March  1,  1849,  while  he  sat  among 
the  auditors  in  the  gloom  of  the  illness  that  was  to  end  his  career — 
assured  the  country  of  his  belief,  from  the  first,  that  the  slavery  agitation 
“would,  if  not  prevented  by  some  timely  and  effective  measures,  end  in 
disunion.”  In  reality  it  was  not  alone  the  institution  of  slavery  that 
threatened  disunion,  though  it  is  uncertain  that  the  South  would  ever  have 
seceded  but  for  slavery.  At  the  bottom  of  the  whole  contro¬ 
versy  lay  the  great  size,  the  varied  climates,  the  diversified  The  underlying 
interests  of  the  country,  which  resulted  in  constant  disputes  ntsnTbetwee^tiie 
between  sections  as  to  the  advisability  of  proposed  legisla-  North  and  South, 
tion.  The  nation  was  trying  a  new  experiment,  to  wit:  the 
joining  of  a  number  of  separate  States,  each  having  its  own  set  of  laws,  in 
one  coherent  federation,  by  an  instrument  adopted  in  a  convention  of 
representatives  of  the  States,  and  known  as  the  Constitution.  When  the 
progress  of  years  made  it  evident  that  sectional  interests  must  inevitably 
clash,  the  South  evinced  the  belief  that  this  instrument  was  simply  a 
compact,  a  partnership  agreement,  which  bound  no  State  to  it  any  longer 
than  the  people  of  the  State  saw  fit.  The  North,  on  the  other  hand,  insisted 
that  the  Constitution  was  something  which  in  its  nature  transcended  a 
compact,  and  was  an  irrevocable  bond  of  union  beyond  the  power  of  any 
State  to  unloosen.  Whatever  the  causes  that  inflamed  men’s  passions  to 
the  fighting  point,  and  however  inevitable  and  pre-ordained  we  may  regard 
that  auto  da  fe  of  our  governmental  system,  the  war  hinged  simply  upon  the 
right  of  secession.  That  fact  is  plain,  if  there  is  one  plain  explanation  in 
history  of  the  reasons  impelling  the  people  of  any  nation  to  plunge  into 
mortal  conflict.  Behind  the  question  of  State  sovereignty  there  lay,  of 


THE  NEW  YORK  STOCK  EXCHANGE 


122 


course,  the  problem  of  the  nature  and  powers  of  the  Constitution.  Three 
hundred  thousand  sons  of  the  North  were  immolated  upon  the  altar  of 
their  country,  incalculable  millions  were  drained  from  the  fountain  of  the 
a  political  public  wealth,  the  fertile  fields  of  the  South  drank  the  blood 

theorem  dis-  of  her  best  citizens,  wdiile  wasted  crops  and  smoking  homes 

cussed  by  the  forecasted  her  commercial  disaster,  American  credit  became 
the  football  of  one  of  the  most  terrible  speculations  in  our 
history — all  to  decide  a  delicate  political  question,  over  which  the  ablest 
statesmen  had  wrangled  for  a  generation,  and  on  which  theorists  differ 
even  to-day.  It  was  a  question  fundamental  to  our  Government,  and  the 
sword  has  answered  it  forever. 

As  early  as  1828,  when  what  the  South  called  the  “  Tariff  of  Abomina¬ 
tions”  was  enacted  into  law,  the  antagonizing  force  of  sectional  interests 
became  strikingly  plain.  The  South  was  then  devoted  almost  entirely  to 
agriculture,  chiefly  the  raising  of  cotton,  and  being  nearly  devoid  of  manu¬ 
factures,  and  importing  and  exporting  very  freely,  naturally  desired  a  tariff 
for  revenue  only.  Sending,  as  she  did,  a  large  amount  of  produce  to 
Europe,  she  no  longer  feared  the  draining  of  her  currency  by  those  impor¬ 
tations  of  Indian  cloths  which  had  induced  her  to  accept  earlier  protective 
measures  with  a  good  grace.  The  tariff  of  1828  was  forced  upon  her,  and 
she  straightway  began  to  reflect  how  easily  she  could  escape  it  by  leaving 
the  Union.  Two  years  later  the  State  rights  issue  evolved  a  memorable 
debate  in  Congress,  the  immediate  provocation  being  a  bill  to  regulate  the 
sale  of  Government  lands.  Senator  Robert  Young  Hayne,  of  South 
Carolina,  made  a  fine  exposition  of  the  doctrine  of  State  sovereignty. 
Webster,  on  January  26,  1830,  delivered  his  famous  “reply  to  Hayne,” 
defining  the  Northern  view  of  the  Constitution.  In  November,  1832,  South 
Carolina  passed  its  ordinance,  nullifying  the  tariff  of  that 
The  state  rights  year  anq  in  December  elected  Hayne  Governor.  President 

issue  in  1830  \  _  ’  ,  ,  .  .  J 

and  1832.  Jackson s  proclamation  denouncing  South  Carolina,  Hayne  s 
proclamation  of  defiance,  the  preparation  of  the  State  to 
resist  the  Government  with  force,  and  the  averting  of  hostilities  by  a  com¬ 
promise  brought  forward  by  Clay,  and  providing  for  a  gradual  reduction 
of  duties,  followed  in  short  order.  The  passage  of  accompanying  legisla¬ 
tion  was  marked  by  a  warm  debate  between  Webster  and  Calhoun — who 
had  taken  Hayne’s  place — in  which  Calhoun  asserted  the  right  of  a  State 
to  withdraw  from  the  Union. 

The  slavery  question  gradually  came  to  replace  the  tariff  issue  as  the 
chief  cause  of  dispute  between  North  and  South.  It  was  kept  continually 
Climate  and  alive  by  agitators,  and  leaped  into  flame  over  the  admission 
slavery.  of  each  new  state  and  the  formation  of  each  new  Territory. 

It  was  a  matter  of  sectional  dispute,  chiefly  for  reasons  of  climate.  Slaves 


SECESSION 


123 


were  not  very  profitable  labor  for  the  North.  They  were  eo  for  the  South. 
They  supported,  moreover,  the  modern  feudalism  which  had  become  dear  to 
the  hearts  of  Southern  whites,  and  they  were  absolutely  necessary  to  its 
continuance.  The  South  was  the  section  really  threatened  by  the  institu¬ 
tion,  which  was,  in  time,  sure  to  work  corruption — as  will  any  system  that 
enables  one  great  class  of  a  community  to  live  upon  the  labor  of  another 
class.  But  Southerners  did  not  perceive  this  menace.  They  regarded  negro 
slavery  as  a  normal  condition,  justified  by  the  inferiority  and  character  of 
the  black  man,  and,  under  divine  Providence,  the  means  of  preserving  the 
prosperity  and  happiness  of  all  classes  in  the  South.  This  sentiment  found 
expression  in  the  utterances  of  their  most  high-minded  citizens,  and  was 
cherished  as  earnestly  in  the  South  as  the  belief  in  the  right  of  every  man 
to  freedom  was  cherished  by  the  abolitionist.  Alexander  H.  Stephens,  vice- 
president  of  the  confederacy,  who  opposed  secession,  with  all  his  eloquence, 
until  the  die  had  been  cast,  and  then  threw  his  whole  fortunes  in  with  the 
seceding  States,  declared,  on  March  21, 1861,  in  a  speech  at  Savannah,  that 
slavery  was  the  negro’s  normal  condition,  and  added :  “  This, 
our  new  Government,  is  the  first  in  the  history  of  the  world  The1  dlv!ne,  Jlght 

.  .  of  slaveholders. 

based  upon  this  great  physical,  philosophical,  and  moral 
truth.  .  .  .  The  substratum  of  our  society  is  made  of  the  material  fitted 
by  Nature  for  it,  and  by  experience  we  know  that  it  is  best,  not  only  for  the 
superior  but  for  the  inferior  race,  that  it  should  be  so.  It  is,  indeed,  in 
conformity  with  the  Creator.  It  is  not  for  us  to  enquire  into  the  wisdom  of 
His  ordinances.” 

The  tariff  dispute  was  merely  a  clashing  of  interests.  But  in  the  quarrel 
over  slavery  there  was  something  more— the  injection  of  a  moral  issue, 
which  engendered  a  bitter  feeling  peculiar  to  itself.  The  South  committed 
the  first  overt  act  of  aggression,  partly  because  her  people  had  been  led  to 
the  belief  that  the  North  intended  to  trample  on  their  sacred  rights  and 
alienate  their  property,  and  that  self-preservation  should  impel  them  to 
strike  the  first  blow. 

On  March  6,  1857,  two  days  after  Buchanan’s  inauguration,  the  United 
States  Supreme  Court  handed  down  its  decision  in  the  famous  Dred  Scott 
case,  which  had  lasted  for  thirty-one  years.  It  held  that  the  Constitution 
was  a  compact,  that  a  slave  was  property,  and  not  a  person,  and  slavery  an 
institution  beyond  the  control  of  Congress.  The  highest  of 
our  judicial  tribunals  thus  vindicated  the  Southern  view.  It 
also  intensified  the  public  feeling.  Lincoln’s  unsuccessful  famousAaid. 
canvass  for  the  Illinois  senatorship,  and  the  debates  with  his 
opponent,  Stephen  A.  Douglas — in  which  the  future  emancipator  declared 
that  the  Government  could  not  “endure  permanently  half  slave  and  half 
free” — and  John  Brown’s  raid  and  capture  at  Harper’s  Ferry,  brought  the 


124 


THE  NEW  YORK  STOCK  EXCHANGE 


dispute  to  fever  heat  in  1859.  The  South  decided  that  the  Republican 
party  was  determined  to  overthrow  slavery,  and  that  secession  was  her 
only  salvation.  Meanwhile  the  newspapers  of  the  day  were  illuminated 
with  fitful  bursts  of  the  flame  that  was  soon  to  grow  into  a  consuming  fire. 
It  was  not  an  era  of  tolerance.  In  December,  1859,  one  James  Powers,  an 
Irish  stonecutter,  who  happened  to  express  his  belief  that  white  labor 
should  be  employed  in  the  South,  was  accused  at  Columbia,  South  Carolina, 
of  being  an  abolitionist  and  approving  John  Brown’s  raid,  and  received 
twenty-nine  lashes  and  a  coat  of  tar  and  feathers  for  his  contumacy. 
Powers  came  North,  and  Horace  Greeley,  who  was  striking  sledge-hammer 
blows  for  abolition  and  Republican  success,  published  his  story  in  the 
Tribune. 


panic.  Stock  prices  at  its  close  had  mounted  to  a  height  that 
showed  how  far  behind  the  market  had  left  the  evil  times  of  1857.  The 
year’s  railroad  building,  amounting  to  some  1,800  miles,  had  been 
conducted  on  sounder  lines  than  theretofore.  A  new  and  important 
branch  of  industry  had  been  started,  with  the  finding  of  petroleum  in  large 
quantities,  by  Edwin  L.  Drake,  at  Titusville,  Pennsylvania.  His  “ strike” 
made  him  only  a  trifling  fortune,  but  laid  the  foundations  of 
Drake  strikes  oil  weajth  for  hundreds  of  others  whose  rush  to  the  oil  field 

at  Titusville  in 

August,  1859.  resembled,  on  a  smaller  scale,  the  pilgrimage  of  gold  seekers  to 
California  in  1849.  Population  had  increased  to  about 
31,000,000.  The  crops  were  abundant,  and  the  country’s  export  trade 
was  growing.  Apparently  the  country  was  entering,  at  the  dawn  of  1860, 
upon  a  period  of  general  prosperity.  The  Western  speculators  in  this  city, 
known  in  Street  language  as  “the  observatory,”  whose  bearish  tactics  had 
won  them  fortunes  in  1857 — the  panic  of  that  year  was  known,  in  fact,  as 
the  “Western  blizzard”  —  seemed  to  have  had  their  day.  Through  the 
early  part  of  1860  the  betterment  of  commercial  conditions  was  of  course 
moderate,  but  all  signs  were  encouraging  save  one.  That  one  was  the 
growing  disaffection  of  the  South. 

In  addition  to  speculation  in  railroad  shares,  and  in  Government  and 
State  securities,  dealing  in  mining  stocks  had  now  become  a  prominent 
feature  of  Wall  Street.  Copper  and  gold  companies,  of  a  rapid 
Speculation  m  growth,  were  in  favor,  and  mining  share  brokers — among1 

mining  shares.  0  7  .  7  °  ° 

others  Ralph  King,  George  F.  Riley,  and  John  Simpkins  — 
were  actively  at  work.  New  York’s  first  Mining  Exchange,  which  was 
started  in  1857  at  No.  29  William  Street,  and  existed  only  for  six  months, 


B 


HE  year  1859  had  been  marked  by  national  frugality  and  industry, 
and  the  American  people  had  recuperated  from  the  effects  of  the 


SECESSION 


125 


constituted  an  arena  for  dealing  in  the  stock  of  North  Carolina  gold  and 
copper  companies,  Tennessee  and  Maryland  copper  companies,  Georgia 
gold  companies,  and  copper  and  lead  companies  of  this  State  and  Pennsyl¬ 
vania,  many  of  the  shares  being  virtually  worthless.1  In  1859  a  second 
Mining  Board  was  started  at  the  rear  of  the  office  of  Talmadge  &  Manley, 
No.  25  William  Street,  Mr.  Talmadge  of  that  firm  holding  the  office  of 
president.  Two  months  after  its  formation  this  Board  moved  across  the 
street  to  larger  quarters,  at  No.  24  William  Street,  where  skilled  manipu¬ 
lators,  under  the  leadership  of  a  Baltimore  clique,  combined  to  sell  various 
ornamental  pieces  of  paper  to  innocent  investors  —  some  legitimate  business 
in  Lake  Superior  copper  shares  serving  the  purpose  of  attracting  the  public 
to  the  market.  The  North  State  Gold  and  Copper  Mining  Company,  which 
owned  property  that  had  cost  $1,200,  and  the  Gardner  Hill  Gold  and 
Copper  Company,  representing  an  actual  cash  investment  of  $30,000,  were 
favorite  “fancies”  on  this  Exchange.  Each  possessed  mining  property  in 
North  Carolina,  and  each  was  capitalized  at  $1,000,000,  in  $5  shares.  The 
North  State  stock  was  “washed”  up  to  four,  while  sales  of  Gardner  stock 
were  actually  made  at  $8  a  share.  The  election  of  Lincoln,  in  1861,  which 
brought  on  a  crash  in  good  investments,  annihilated  the  airy  nothings  of 
the  Mining  Board,  and  after  the  suicide  of  Charles  Kowalski,  treasurer  of 
the  organization,  it  was  found  that  he  had  expended  its  funds  in  private 
speculations.1  From  that  time  until  1864  dealing  in  mining  shares  was 
carried  on  at  the  New  York  Stock  and  Exchange  Board,  Mariposa  stock 
being  a  specially  active  issue. 


EjORNELIUS  VANDERBILT  and  Daniel  Drew,  whose  operations  not 
|  long  afterward  were  to  be  of  enormous  importance  to  the  Street, 
were  by  no  means  out  of  the  reckoning  in  1860.  The  hand  of  the 
“Speculative  Director”  was  observed  in  the  activity  of  Erie,  a  stock  that 
was  apparently  as  lively  as  if  the  road  had  not  become  bankrupt  in  the 
previous  year.  Those  who  sold  it  short  were  likely  to  get  their  fingers 
burnt.  Mr.  Vanderbilt  was  at  this  time  engaged  in  competition  with  the 
Pacific  Mail  Steamship  Company,  for  the  business  of  carrying  passengers 
between  New  York  and  California  by  way  of  the  Isthmus,  a  contest  which 
he  ultimately  accepted  $600,000  a  year  to  terminate.  Wild  rumors  filled 
the  market  while  this  fight  was  in  progress.  “The  reported 
sale  of  the  Pacific  steamships  to  Mr.  Vanderbilt,”  says  the  A  rumor of  186°- 
Tribune  of  January  16,  1860,  “was  generally  credited  and  it  was  looked 
upon  as  a  public  calamity,  as  it  would  tend  to  establish  a  monopoly  and 
increase  the  rates  of  fare.”  Another  print,  on  February  1st,  informs  us  of 

jMen  and  Mysteries  of  Wall  Street:  James  K.  Medbery.  Boston.  1870. 


126 


THE  NEW  YORK  STOCK  EXCHANGE 


w-  V* 

)  n 

>  (  &,. 

f  S-  <.  >?»  '4 

*  '  *'  •  •  i  .  <*c 


a  bear  attack  on  Pacific  Mail,  due  to  the  news  that  Mr.  Vanderbilt  had 
reduced  the  fare.  The  report  of  the  reduction  was  true.  His  vessels  were 
getting  plenty  of  business  at  the  time,  for  the  growing  political  agitation 
had  the  effect  of  increasing  emigration 
to  California.  The  Pacific  Mail  Company 
was  earning  more  than  forty  per  cent. 

To  thoughtful  men  it  became  more 
evident  each  day  that  the  nation  was 
approaching  a  crisis.  The  belief  that 
this  was  so  operated  as  a  check  to  the 
buoyancy  of  the  market.  Opinion  was 
freely  expressed  that  the  success  of  the 
Republican  party  at  the  presidential 
election  would  mean  the  break-up  of  the 
Union,  and  it  constantly  became  plainer 
that  such  a  success  was  probable.  Man¬ 
ipulations  by  insiders  were  not  wanting 
to  add  ground  for  the  public’s  disin¬ 
clination  to  buy  stocks.  A  newspaper 
writer,  in  discussing  Rock  Island  on 
October  5th,  had  this  to  say :  “  There 

is  nothing  further  in  regard  to  the  divi¬ 
dend  matter.  It  is  understood  that  the  directors  blame  Mr.  Farnum,  the 
president,  for  the  deception  that  was  practised  on  the  public ; 
there  is  some  talk  of  a  meeting  of  stockholders  to  review  the 
action  of  the  Board.  In  some  quarters  it  is  asserted  that 
Dr.  Thomas  C.  Durant,  the  only  member  of  the  Board  who  voted  for  the 
dividend,  is  about  to  resign.  We  should  have  supposed  that  if  anybody 
was  expected  to  resign  it  would  be  the  directors  who  gave  out  that  the 
dividend  would  be  passed,  ordered  the  check  book  and  proclaimed  the  fact, 
and,  after  selling  out  their  stock,  voted  it  inexpedient  to  pay  a  dividend. 
The  sooner  such  individuals  find  new  spheres  of  usefulness  the  better  for 
the  company.” 

Abraham  Lincoln  had  been  nominated  for  the  presidency,  and  Hannibal 
Hamlin  for  the  vice-presidency,  by  the  Republican  party  in  May,  1860, 
upon  a  platform  which  insisted  that  Congress  had  no  authority  to  give 
legal  existence  to  slavery  in  any  Territory,  and  demanded  that 
Kansas  be  admitted  as  a  free  State.  It  branded  as  a  dan¬ 
gerous  political  heresy  the  ‘‘new  dogma,  that  the  Constitution 
of  its  own  force  carries  slavery  into  any  or  all  the  Territories.”  Lincoln  had 
declared  that  either  the  opponents  of  slavery  would  “place  it  where  the 
public  mind  shall  rest,  in  the  belief  that  it  is  in  the  course  of  ultimate 


CORNELIUS  VANDERBILT. 


A  sharp  trick  in 
Rock  Island. 


An  outspoken 
platform. 


SECESSION 


127 


extinction,”  or  that  it  would  be  pushed  forward  till  it  should  become  lawful 
in  all  the  States.  Standing,  as  he  did,  on  a  platform  which  insisted  that 
slavery  must  not  be  pushed  forward  at  all,  Lincoln  evidently  intended,  in 
the  opinion  of  the  South,  to  force  the  remaining  alternative,  and  help  it  on 
the  road  to  ultimate  extinction.  His  defeat  the  Southern  States  regarded 
as  the  condition  prerequisite  to  their  remaining  in  the  Union,  and  they 
threw  all  their  strength  to  the  support  of  his  rival,  Stephen  A.  Douglas,  of 
Illinois.  The  participants  in  the  debates  of  1859 — the  most  famous  in  our 
history — wrere  now  rivals  for  the  highest  honor  in  the  nation’s  gift,  and  the 
nation  recognized  the  contest  as  a  determinative  ordeal. 


On  November  6th  Lincoln  and  Hamlin  were  elected  by  a  decisive 
majority.  The  market  appeared  to  have  discounted  the  event,  for  stocks 
opened  buoyantly  on  the  day  following ;  in  fact,  for  about  a  week,  prices 
were  sustained  by  an  evident  hope  that  the  peril  of  disunion 
might  be  averted.  But  the  South  made  it  too  plain,  by  the  Lincoln’s  eiec- 
way  she  took  the  news,  that  she  believed  there  was  only  one  by  a  panic, 
thing  left  forher  to  do.  The  gradual  spread  of  timidity  in  this 
city  first  became  manifest  through  a  tightening  of  the  money  market, 
about  the  middle  of  November.  Then  the  falling  prices  of  securities 
portended  calamity.  They  rallied,  but  only  to  fall  still  lower.  With 
ominous  rapidity  the  contraction  of  the  money  market  paralyzed  com¬ 
merce.  Foreign  exchanges  reflected  the  condition  of  the  public  mind. 
Ships  half-laden  with  grain  and  flour  lay  in  dock,  unable  to  put  to  sea 
because  shippers  could  find  no  one  to  take  their  bills.  For  a  similar  reason, 
agents  of  British  houses  were  unable  to  purchase  supplies.  Importers, 
failing  to  dispose  of  their  paper,  had  no  funds  with  which  to  purchase 
exchange.  Cotton  could  not  be  stored  because  of  the  condition  of  the 
money  market.  The  banks  were  extravagantly  cautious  and  independent ; 
capitalists  refused  to  take  any  but  gilt-edged  paper,  and  demanded  upon 
that  a  discount  of  one  or  one  and  a  half  per  cent,  a  month.  Late  in 
November  the  old  and  wealthy  New  Orleans  house  of  William  Fellowes 
&  Co.  was  forced  into  bankruptcy  by  the  crisis.  In  the  North  it  involved  a 
general  shutting  down  of  business. 

On  November  16th  the  firm  of  Brown  Brothers  proposed  to  the  banks 
a  scheme  for  the  relief  of  the  universal  distress.  The  banks  were  to  raise 
$1,000,000  for  that  purpose.  The  firm  would  purchase  Pro-  „  .  „ 

ti  •  r  Vain  effort  to 

duce  Exchange  bills  to  a  like  amount,  paying  for  them  m  their  induce  the  banks 
own  sixty-day  paper,  and  this  paper  the  banks  were  to  dis-  to  relieve  the 
count,  Brown  Brothers  agreeing  to  redeem  it,  at  maturity,  money  market- 
with  specie  imported  from  the  other  side.  Although  the  plan  seemed 
essentially  reasonable,  and  the  sum  involved  was  moderate,  the  negotia¬ 
tions  fell  through,  owing  to  the  opposition  of  Mr.  Punnett,  president  of  the 


128 


THE  NEW  YORK  STOCK  EXCHANGE 


Bank  of  America.  The  situation  did  not  relieve  itself  until  the  second  week 
in  December,  while  extreme  hardship  was  experienced  in  the  meantime.  “  It 
is  supposed,”  said  the  Herald  of  December  3d,  “that  10,000  men  are  out  of 
employment  in  New  York  alone,  and  there  is  not  a  manufacturing  establish¬ 
ment  in  New  England  which  has  not  reduced  its  force  during  the  past 
month.  The  West,  just  recovering  from  the  effects  of  1857,  and  on  the  eve 
of  a  new  era  of  prosperity,  is  replunged  into  distress  and  suffering.” 

It  was  in  the  course  of  this  demoralization,  on  November  23d,  that  the 
first  Clearing  House  certificates  were  issued.  They  bore  interest  at  the  rate 
of  seven  per  cent.  The  collaterals  deposited  by  the  banks 
First  issue  of  receiving  them  were  United  States  stocks,  interest-bearing 

Clearing  House  °  7  0 

certificates.  Treasury  notes,  and  stock  of  the  State  of  New  York.  It  was 
not  until  February  21, 1861,  that  the  last  of  this  issue — which 
amounted  in  all  to  $7,375,000 — left  the  Clearing  House,  and  on  March  9, 
1861,  the  last  certificate  was  retired  and  cancelled.  An  idea  of  the  range 
of  prices  during  the  course  of  the  panic  of  1860  may  be  derived  from  the 
following  table : 


Security. 

Nov.  10. 

Nov.  17. 

Nov.  24. 

Dec.  1. 

Dec.  8. 

Missouri  sixes,  . 

New  York  Central, 

76 

69 

72 

70 

64 

.  .  .  79* 

72 

78 

75* 

70* 

Reading,  .... 

37f 

36 

37 

34J 

30* 

Erie, . 

32* 

27* 

31f 

29* 

24* 

Michigan  Central, 

59* 

47 

55 

50* 

43* 

Southern  guaranteed, 

.  35* 

28* 

34 

31 

25* 

Illinois  Central, 

.  .  .  671 

56* 

62 

58 

53| 

Galena  &  Chicago, 

67 

58 

66* 

63f 

59* 

Chicago  &  Rock  Island, 

.  58* 

51 

57* 

53J 

43 

Cleveland  &  Toledo,  . 

.  31* 

25| 

30* 

26£ 

20* 

Panama  Railroad, 

.  119 

109 

119 

114 

109 

Hudson  River,  . 

56 

47* 

48 

43* 

37 

Pacific  Mail, 

90 

74 

84 

81 

78* 

The  week  ending  with  December  8th,  the  darkest  of  the  series,  saw  a 
depression  of  six  to  eight  per  cent,  in  Government  and  State  securities. 

One  event  of  this  week,  destined  to  be  fraught  with  con- 
Comeiius  van-  siderable  importance,  was  the  election  of  the  directors  of 
Se  directorate.6  New  York  &  Erie  Railroad.  Daniel  Drew  and  all  the  other 
living  directors  were  reelected.  One  place  had  been  vacated 
by  the  death  of  Henry  Sheldon,  and  this  place  was  filled  by  Commodore 
Vanderbilt. 

December  was  a  gloomy  month  in  the  New  York  stock  market.  Upon 
the  heels  of  the  panic  came  the  Russell  and  Bailey  robberies  at  Washington. 
State  bonds,  which  formed  a  portion  of  the  Indian  Trust  Fund,  had  been 
stolen  from  the  Department  of  the  Interior  and  put  into  circulation,  to 
the  amount  of  about  $900,000,  chiefly  in  this  city.  South  Carolina  held  a 


SECESSION 


129 


South  Carolina 
secedes  and 
occupies  Forts 
Pinckney  and 
Moultrie. 


State  convention  at  Columbia  on  December  17th,  adjourned  to  Charleston, 
and  on  December  24th  adopted  an  address,  condemning  the  North,  while 
her  Governor,  Francis  W.  Pickens,  issued  a  proclamation  of  secession.  The 
United  States  Custom  House,  post  office,  and  arsenal,  at  Charleston,  were 
seized  at  once  by  the  secessionists,  who  also  took  possession 
of  Forts  Pinckney  and  Moultrie  in  the  city’s  harbor.  Major 
Anderson,  the  Federal  officer  stationed  at  Fort  Moultrie, 
withdrew  the  eighty  men  under  his  command  to  Fort  Sumter. 

South  Carolina  appointed  commissioners  to  visit  other  slave¬ 
holding  States  and  invite  them  to  secede.  General  Cass,  Secretary  of  State, 
had  already  left  Buchanan’s  Cabinet  because  of  the  President’s  refusal  to 
reinforce  the  Charleston  forts,  and  Howell  Cobb,  Secretary  of  the  Treasury, 
had  resigned  his  office  to  return  to  his  native  State,  Georgia,  and  join  the 
Southern  cause.  Mr.  Floyd,  the  Secretary  of  War,  resigned  on  December 
29th,  because  the  President,  who  seemed  afraid  to  take  a  decided  stand, 
either  for  or  against  the  Union,  refused  to  recall  Anderson  from  Fort  Sum¬ 
ter.  Confederate  guns,  mounted  on  the  land  batteries,  frowned  upon  that 
sparsely  manned  stronghold,  and  through  the  North  and  South  the  con¬ 
sciousness  spread  that  the  dogs  of  war  were  chafing  in  the  leash.  Floyd, 
who  was  a  Southerner,  had  taken  good  care  to  see  that  the  Southern 
arsenals  were  well  supplied  with  arms  and  that  United  States  troops  were 
widely  dispersed  before  resigning  his  office. 

Mississippi  responded  to  South  Carolina’s  appeal  by  passing  an  ordi¬ 
nance  of  secession  on  January  9,  1861,  the  day  on  which  the  Charleston 
batteries  fired  on  the  steamer  “Star  of  the  West,”  sent  to  carry  reinforce¬ 
ments  to  Anderson.  Mississippi’s  example  was  followed  on  January  10th  by 
Florida;  on  January  11th  by  Alabama;  on  January  19th  by 
Georgia;  on  January  26th  by  Louisiana,  and  on  February 
7th,  in  an  irregularly  called  convention,  by  Texas.  Eleven 
days  later  General  Twiggs,  a  United  States  officer  of  Georgian 
birth,  surrendered  his  command  in  Texas,  the  largest  body  of 
troops  at  any  one  point,  to  the  secessionists  of  that  State.  This  act 
resulted  in  his  dismissal  from  the  army.  Meanwhile  a  peace  convention 
met  at  Washington,  chose  ex-President  Tyler,  of  Virginia,  chairman,  and 
formulated  various  constitutional  amendments,  all  of  which  were  designed 
to  pacify  and  reclaim  the  South,  and  all  of  which  were  promptly  rejected  by 
Congress.  Delegates  from  the  seven  seceding  States  met  at  Montgomery, 
Alabama,  elected  Howell  Cobb  chairman,  and  formed  a  provisional  con¬ 
stitution  for  the  “Confederate  States  of  America.”  Jefferson  Davis,  of 
Mississippi,  was  chosen  President,  and  Alexander  H.  Stephens,  of  Georgia, 
Vice-President.  The  Cabinet  of  Mr.  Davis  was  as  follows :  Robert  Toombs, 
of  Georgia,  Secretary  of  State ;  Charles  G.  Memminger,  of  South  Carolina, 


Six  States 
respond  to 
South  Carolina’s 
call. 


130 


THE  NEW  YORK  STOCK  EXCHANGE 


Secretary  of  the  Treasury;  Leroy  P.  Walker,  of  Alabama,  Secretary  of  War; 
Stephen  R.  Mallory,  of  Florida,  Secretary  of  the  Navy;  John  H.  Reagan,  of 
Texas,  Postmaster  General;  Judah  P.  Benjamin,  of  Louisiana,  Attorney 
General. 

Lincoln  took  office  on  March  4th,  and  in  his  inaugural  address  declared 
his  intention  not  to  interfere  with  slavery  in  the  States,  but  denied  the  right 
of  any  State  to  secede.  He  declared  the  principle  of  secession  to  be  the 
essence  of  anarchy.  His  Cabinet,  whose  personnel  was  later  subjected  to 
change,  consisted,  at  first,  of:  William  H.  Seward,  Secretary  of  State; 
Salmon  Portland  Chase,  Secretary  of  the  Treasury ;  Simon  Cameron,  Secre¬ 
tary  of  War;  Gideon  Welles,  Secretary  of  the  Navy;  Caleb  B.  Smith,  Secre¬ 
tary  of  the  Interior ;  Montgomery  Blair,  Postmaster  General,  and  Edward 
Bates,  Attorney  General.  Secretary  Seward  was  approached  with  overtures 
from  the  Confederates,  and  refused  to  recognize  the  new  Government.  Mr. 
Lincoln’s  Cabinet,  on  March  21st,  decided  to  send  a  fleet  to  relieve  Fort 
Sumter.  It  was  dispatched  on  April  6th  and  7th,  formal  notice  of  the 
action  being  given  to  Governor  Pickens  on  April  8th.  General  Beauregard, 
in  command  of  the  Confederate  forces  at  Charleston,  telegraphed  the  news 
to  Montgomery.  Mr.  Walker  replied  by  telling  him  to  demand  the  surren¬ 
der  of  the  fort,  and  to  attack  it  in  the  event  of  a  refusal. 

Before  daybreak  on  April  12th  the  bombardment  upon  Fort  Sumter 
began  and  Major  Anderson  replied.  On  the  following  day,  his  supplies 
having  become  exhausted,  he  surrendered  and  marched  out 
with  flying  colors.  The  first  shot  directed  at  the  fort,  the 
signal  to  the  nation  that  a  fratricidal  war  was  begun,  was 
fired  by  a  Virginian,  Edmund  Ruffin,  who  asked  the  privilege,1  and  who 
committed  suicide  just  before  the  war,  thus  inaugurated,  came  to  an  end. 
The  South  exulted  with  great  joy  at  the  capture  of  Sumter,  and  Mr.  Walker, 
the  Confederate  Secretary  of  War,  publicly  prophesied  that  the  Southern 
flag  would  float  over  the  Capitol  dome  at  Washington  before  May  1st. 

President  Lincoln  instantly  called  for  75,000  militiamen,  “to  cause  the 
laws  to  be  duly  executed.”  He  treated  the  secession  movement  merely  as 
an  insurrection,  apportioning  troops  to  be  furnished  among  all  the  States. 
The  free  States  responded  enthusiastically ;  the  seceding  States,  of  course, 
ignored  the  proclamation,  and  the  border  States  flatly  refused  to  obey  it. 
Massachusetts  was  the  first  to  get  her  men  into  the  field,  and  on  April 
19th  her  contingent,  while  marching  through  Baltimore,  was 
attacked  by  a  secession  mob,  and  bloodshed  on  both  sides 
resulted.  President  Lincoln,  on  the  same  day,  declared  a 
blockade  of  all  Southern  ports.  While  he  was  promulgating  the  order, 
the  troops  of  Virginia — the  State  having  seceded  on  April  17th — were 

1 A  History  of  the  American  People:  Francis  Newton  Thorpe.  Chicago.  1901. 


Attack  on 
Fort  Sumter. 


Bloodshed  at 
Baltimore. 


SECESSION 


131 


seizing  the  immensely  valuable  arsenal  at  Harper’s  Ferry,  and,  in  addition, 
the  navy  yard  at  Norfolk,  with  the  steam  frigate  “Merrimac”  and  2,000 
cannon.  Tennessee  and  Arkansas  went  out  of  the  Union  on  May  6th  and 
North  Carolina  on  May  20th.  This  left  four  of  the  fifteen  slave  States — 
Delaware,  Maryland,  Kentucky,  and  Missouri — still  formally  in  the  Union. 
Their  allegiance  throughout  the  war  was  of  a  divided  charac¬ 
ter,  Missouri  and  Kentucky  even  being  represented  in  the  Con-  fh^Confedemcy! 
federate  Congress,  while  many  of  Maryland’s  citizens  joined 
the  Confederate  Army.  West  Virginia,  comprising  about  a  third  of 
Virginia’s  population,  stood  by  the  Union  and  formed  a  provisional  gov¬ 
ernment.  She  was  admitted  to  Statehood  in  the  following  spring.  Rich¬ 
mond  was  made  the  capital  of  the  Confederacy.  President  Lincoln  had 
called  for  42,000  volunteers  to  serve  three  years,  for  22,000  men  to  be 
added  to  the  regular  army  — which  was  only  16,000  strong— and  for 
18,000  men  to  be  added  to  the  regular  navy.  The  Navy  Department 
began  the  purchasing  and  chartering  of  merchant  vessels.  The  secessionists 
had  already  taken  measures  to  issue  letters  of  marque  to  privateers. 

It  is  an  interesting  commentary  upon  the  slowness  with  which  Wall 
Street  got  its  news,  upward  of  forty  years  ago,  that  the  market  was 
noticeably  firm  on  the  day  General  Beauregard’s  men  opened  fire  on 
Fort  Sumter.  The  cannonading  began  before  daybreak  on  Friday, 
April  12,  1861.  In  this  city  prices  of  securities  advanced  that 
day,  aided  by  the  covering  of  shorts.  The  following  morning  of 

the  newspapers  informed  the  public  of  the  true  situation.  Fort  Sumter. 
United  States  sixes  of  1881  remained  steady  as  a  rock,  but 
the  general  list  receded  nearly  two  per  cent,  on  the  average.  The  decline, 
of  course,  would  have  been  a  great  deal  sharper  had  the  market  not  been 
reflecting,  for  months,  the  growing  public  belief  that  conflict  with  the 
South  was  inevitable.  The  following  prices  indicated  the  depression  conse¬ 
quent  to  the  firing  on  Fort  Sumter : 


Security. 

New  York  Central,  . 
Hudson  River  Railroad, 
Reading,  . 

Harlem  Railroad, 
Michigan  Central,  . 
Erie, 

Illinois  Central,  scrip, 


April  12. 

74* 
41  to  41* 

38* 

13| 

50 

26 

70* 


April  13. 
72$  to  73 
38* 
35  to  36 
13 

47*  to  48* 
23*  to  24 
67*  to  68 


North  and  South  had  now  girded  their  loins  for  one  of  the  greatest 
struggles  of  history.  The  defence  of  the  Union  was  destined  to  progress 
but  a  short  distance  before  necessitating  the  first  of  a  series  of  extraordi¬ 
nary  financial  measures,  which  were  to  bring  about  many  a  speculative 
cataclysm  in  this  city. 


IX 

LEGAL  TENDERS 

was  a  fundamental  part  of  Gladstone’s  political  creed  that 
nations,  like  men,  have  their  responsibilities  and  their  duties, 
and  are  as  much  bound  to  conform  their  conduct  to 
just  standards  as  individuals  are.  The  financial  history  of 
the  United  States  affords  good  evidence  that  nations  are 
also  bound,  and  not  less  than  individuals,  to  meet  their 
financial  obligations  in  a  straightforward  and  sensible  manner,  and  that 
they  will  suffer,  in  the  long  run,  unless  they  do  so.  Since  Hamilton’s  genius 
put  the  credit  of  this  country  upon  a  substantial  basis,  Congress  had 
habitually  used  straightforward  means  to  raise  the  sums  requisite  for  the 
Federal  Administration.  In  Jackson’s  day  the  civilized  world  had  even 
been  jarred  by  the  barbarous  spectacle  of  a  nation  paying  off  its  entire 
debt.  But  the  stress  of  civil  conflict  put  a  new  face  upon  the  situation 
and  set  the  Government  again  to  raising  money,  not  by  the  fairest  and 
most  prudent  but  by  the  easiest  method ;  and  the  evil  and  uncertainty  of 
the  system  centred  in  Wall  Street,  seething  and  bubbling  like  the  elements 
in  a  witch’s  pot. 

Of  all  classes  of  speculation,  that  in  money — the  measure  of  value  used 
for  the  day  laborer’s  earnings,  the  farmer’s  produce,  and  the  debt  of  a 
nation — is  most  productive  of  harm.  Speculation  in  stocks  may  be  ruinous 
to  an  individual,  but  in  it  and  through  it  there  is  created  a 
Speculation  in  market  for  securities  which  may  serve  as  the  basis  for  great 
noteg  constructive  and  industrial  enterprises,  speculation  m  gram, 

or  cotton,  or  coffee,  enables  the  farmer  or  planter  to  strike  a 
bargain  for  his  crop  long  before  it  has  ripened  in  the  sun.  But  speculation 
in  Government  notes  is  quite  a  different  thing.  It  deranges  business  calcu¬ 
lations,  artificially  raises  or  lowers  the  standard  of  value,  that  must  be 
accepted  in  daily  life  by  practically  every  human  being  in  the  country, 


LEGAL  TENDERS 


133 


disturbs  the  relations  of  debtors  to  creditors,  and  is  usually  tainted  with 
corruption.  Of  course,  the  Gold  Room,  the  field  of  the  manipulation  that 
culminated  in  Black  Friday,  and  the  arena  where  Union  and  Southern 
sympathizers  often  met  in  bodily  conflict,  also  served  some  excellent  pur¬ 
poses.  Through  its  aid  importers  and  foreign  exchange  bankers,  all  who 
had  obligations  to  meet  in  gold  at  some  definite  time  in  the  future,  could 
secure  themselves  in  the  interim  against  the  market  fluctuations  of  the 
precious  metal.  Merchants  and  manufacturers,  by  selling 
gold  for  future  delivery,  could  guard  against  any  currency  valu¬ 
ation  which  would  lessen  the  prices  obtainable  for  their  stock. 

Then  if  gold,  measured  in  greenbacks,  rose,  they  lost  nothing,  inasmuch  as 
their  goods  also  rose  in  value.  If  gold  fell,  their  loss  in  the  greenback  value 
of  their  goods  could  be  offset  by  covering,  at  a  profit,  the  short  sales  made 
in  the  Gold  Room.  In  fine,  the  Gold  Room  was  a  necessary  adjunct  to  the 
condition  of  a  fluctuating  medium  of  exchange.  But  the  fluctuations  of 
that  medium,  coupled  with  the  speculation,  were  a  great  evil  to  the  country, 
and  could  have  been  avoided  by  the  drastic  policy  of  taxing  the  people  to 
pay  the  cost  of  war. 


Uses  of  the 
Gold  Room. 


EFERENCE  was  made  in  the  last  chapter  to  the  two  chief  phases 
of  Wall  Street  activity  in  the  Sixties.  Of  these  it  will  be  found 
convenient  to  take  up  the  subject  of  gold  speculation  first,  since 
that  was  the  direct  product  of  conditions  peculiar  to  the  times,  and  was 
vastly  more  potent  in  its  effect  than  the  famous  Erie  imbroglios  or  the 
triumphs  of  Commodore  Vanderbilt  in  Hudson  and  Harlem.  To  under¬ 
stand  the  way  in  which  the  Government  drifted  into  the  expedient  of  issuing 
irredeemable  legal  tenders,  apparently  unmindful  of  the  havoc  wrought  by 
just  such  means  in  Continental  days,  we  must  go  back  to  an  important 
visit  of  Secretary  Salmon  P.  Chase,  of  the  Treasury,  to  this  city  in  the 
summer  of  1861,  and  the  subsequent  arrangement  which  he  made  with  the 
banks  of  New  York,  Boston,  and  Philadelphia,  to  finance  the  Government’s 
martial  operations. 

At  first  the  importance  of  the  war  was  utterly  misjudged  on  both  sides. 
The  South  boasted  that  one  Southerner  was  the  equal  of  five  Yankees  in 
battle,  and  also  that  “Cotton  is  King;”  that  the  shutting  off  of  Europe’s 
supply  of  cotton  by  blockading  Southern  ports  would  pro¬ 
duce  an  unbearable  condition  abroad  and  lead  Old  World  pending 
powers  to  intervene.  She  was  mistaken  in  both  hypotheses.  struggle. 

At  the  outset  her  soldiers,  more  accustomed  to  bearing  arms 

and  fighting  on  their  native  soil,  may  have  been  superior  to  Northern 

troops ;  but  this  superiority  gradually  lessened  with  the  hardening  of  raw 


134 


THE  NEW  YORK  STOCK  EXCHANGE 


Union  recruits  into  capable  men.  The  high  prices  of  cotton  produced  by 
the  blockade  stimulated  its  production  in  South  America,  Egypt,  and  India, 
and  England  and  France  did  not  interfere,  while  the  South  saw  scores  of 
her  merchantmen  captured  as  they  attempted  to  steal  out  to  sea  with 
cargoes  destined  for  European  ports.  The  North  was  equally  infatuated 
with  the  expectation  of  speedy  success.  With  her  20,000,000  of  population 
as  against  the  5,000,000  or  6,000,000  of  Southern  whites,  her  greater 
wealth  and  more  varied  resources,  her  control  of  the  governmental 
administrative  machine  and  the  navy,  her  opportunity  to  use  the  govern¬ 
mental  credit,  and  the  readiness  her  citizens  showed  to  enlist  under  the 
Union  flag,  how  could  she  find  any  difficulty  in  quelling  this  foolish  insurrec¬ 
tion?  “On  to  Richmond!”  shouted  the  confident  adherents  of  President 
Lincoln.  “Capture  their  capital,  and  they  will  all  surrender  in  a  body!” 
General  McDowell  did  move  out  from  Washington  into  Virginia,  but  he  was 
stopped  a  considerable  distance  this  side  of  Richmond.  On  July  21, 1861, 
as  our  volunteers  came  streaming  wildly  back  along  the  Centreville  turn¬ 
pike,  the  spectators  who  had  sallied  out  to  see  a  Union  victory  felt  a  pre¬ 
sentiment  that  perhaps  the  nation  really  was  on  the  brink  of  a  serious  war. 

Some  of  our  English  friends  stood  the  calamity  with  great  composure. 
Lord  Palmerston  gave  public  utterance  to  a  rather  facetious  remark  about 
the  “unfortunate  rapid  movements”  of  the  Union  troops  after  the  battle 
of  Bull  Run,  which  might  better  have  been  left  unsaid.  The  American  Gov¬ 
ernment  recognized  the  necessity  of  providing  the  sinews  of  a  war  on  a 
liberal  scale. 

Congress  had  authorized  a  fresh  loan  of  $10,000,000  shortly  before 
Lincoln’s  inauguration.  The  bonds  ran  for  twenty  years,  and  bore  six  per 
cent,  interest.  In  the  week  ending  with  June  24th,  at  the 
Government  bottom  of  a  market,  the  declining  character  of  which  had 
bargain 'counter.  giyen  evidence  that  Wall  Street  at  least  was  skeptical  of  the 
briefness  of  the  war,  these  bonds  sold  as  low  as  83%.  The 
Chamber  of  Commerce  in  New  York  had  endeavored  to  get  subscriptions  to 
the  Government  loan  by  sending  circulars  throughout  the  Northern  States, 
asking  citizens,  public  officials,  and  banks  and  other  institutions  to  act  as 
voluntary  agents.  This  plan  availed  very  little.  Capital  was  unmistak¬ 
ably  timid. 

On  July  17th  there  were  authorized  additional  loans,  to  the  amount  of 
$250,000,000,  to  take  the  form  of  seven  per  cent,  twenty-year  bonds,  or 
Treasury  notes,  bearing  7 A  per  cent,  interest,  and  running 
three  years — these  notes  came  later  to  be  known  as  “seven- 
thirties” — except  that  $50,000,000  of  the  authorized  amount 
might  be  in  currency  notes,  payable  on  demand,  without  interest.  The 
negotiations  between  Secretary  Chase  and  the  New  York  banks,  arising  as 


New  loans 
authorized. 


COPPER  TOKENS  USED  B  Y  T  RADES  M  E  N ,  AT  VARIOUS  DATES 


* 


LEGAL  TENDERS 


135 


a  result  of  this  measure,  have  been  ably  described  by  one  of  the  principal 
participants,  George  S.  Coe,  president  of  the  American  Exchange  Bank,  in 
an  appendix  to  Elbridge  G.  Spaulding’s  “Financial  History  of  the  War,” 
published  in  1875.  His  testimony  on  this  head  is  certainly  of  as  good  a 
character  as  could  be  desired.  Speaking  of  the  state  of  affairs  just  prior  to 
Secretary  Chase’s  visit  to  New  York  in  August,  Mr.  Coe  says: 


“Fortunately,  the  commercial  conditions  of  the  Northern  States  were 
altogether  favorable.  The  panic  of  1857  had  been  followed  by  three  or  four 
years  of  great  productiveness  and  economy,  which  had  so  turned  interna¬ 
tional  exchanges  in  favor  of  this  country  that  larger  balances  in  coin  than 
ever  before  had,  during  1860  and  1861,  been  imported  from  Europe,  the 
banks  in  New  York  alone  holding  the  unprecedented  amount  of  $50,000,- 
000,  equal,  in  August,  1861,  to  about  fifty  per  cent,  of  their  liabilities,  while 
the  apprehension  of  war  had  produced  a  general  curtailment  of  credit 
throughout  the  Northern  States.” 


Secretary  Chase 
takes  counsel 
with  New  York 
bankers. 


Secretary  Chase,  on  coming  to  this  city,  Mr.  Coe  tells  us,  asked  those 
persons  who  were  supposed  to  control  capital  to  meet  him  at  the  house  of 
John  J.  Cisco,  then  Assistant  Treasurer  of  the  United  States  in  this  city. 
Here  was  a  large  gathering  of  the  representatives  of  wealth  in 
various  lines  of  business.  Mr.  Coe  suggested  to  the  Secretary 
an  organization  of  the  banks  of  the  North  for  the  purposes  of 
advancing  capital  on  Treasury  notes,  “seven-thirties,”  and  of 
effecting  their  general  distribution  among  the  people  at  large. 

The  suggestion  struck  Mr.  Chase  as  a  good  one.  He  asked  Mr.  Coe  to  pre¬ 
sent  it  to  the  bankers  at  a  meeting  to  be  held  the  following  day  at  the 
American  Exchange  Bank.  At  this  meeting  a  committee  of  ten  was  selected 
to  draw  up  a  plan.  The  members  of  this  committee  met  at  the  Bank  of 
Commerce  and  agreed  unanimously  upon  a  scheme  which  certainly  reflected 
credit  upon  their  appreciation  of  the  country’s  needs.  It  consisted  of  the 
forming  of  a  new  organization,  the  Associated  Banks  of  New  York,  Boston, 
and  Philadelphia,  to  take  up  immediately  “seven-thirty”  notes  to  the 
amount  of  $50,000,000,  at  par,  $50,000,000  more  to  be  taken  in  sixty 
days,  and  another  $50,000,000  sixty  days  later.  The  banks  were  to  offer 
these  notes  for  sale  at  the  same  price,  without  a  charge  of  any  sort.  Clear¬ 
ing  House  certificates  were  also  to  be  issued,  and  it  was  decided  to  appro¬ 
priate  the  coin  of  the  various  banks  to  one  common  fund  and  average  it 
among  them. 

The  banks  of  the  three  cities  concerned  entered  into  the  plan  with 
apparently  as  much  enthusiasm  as  if  it  had  promised  them  a  Banks  rally  to 
good  profit.  Their  aggregate  united  capital  amounted  to  the  Govern- 
$120,000,000.  Aggregate  deposits  of  $125,617,207,  and  a  ment’8  re9cue- 
total  circulation  of  $16,964,299,  made  their  liabilities  $142,581,506,  while 


136 


THE  NEW  YORK  STOCK  EXCHANGE 


against  this  sum  they  held  coin  to  the  amount  of  $63,165,039,  or  forty- 
five  per  cent,  of  their  deposits  and  circulation  combined.  It  was  found 
impracticable  to  include  Ohio  and  Indiana  in  the  league,  and  “the  only 
other  banks  organized  under  a  compacted  system,”  namely,  the  State 
banks  of  Missouri,  were  left  out  because  of  their  proximity  to  the  Confed¬ 
erate  lines. 

It  was  now  a  question  of  moment  as  to  how  payment  for  the  Treasury 
notes,  amounting  to  $150,000,000,  should  be  made  to  the  Government. 
Secretary  Chase  naturally  desired  to  have  it  made  in  coin.  Obviously  the 
reserve  fund  of  the  banks  was  insufficient  to  supply  half  of  it ;  but  it  was,  of 
course,  plain  that,  as  the  money  received  by  the  Government  for  its  notes 
was  disbursed  in  the  purchase  of  arms  or  provisions,  or  in  soldiers’  pay,  it 
would  find  its  way  back  to  the  banks  and  replenish  the  reserve.  Mr.  Chase 
believed  that  this  process  was  quite  safe  enough.  He  was  not  a  banker. 
He  had  been  selected  for  the  Treasury  portfolio  chiefly  because  of  his  high 
character  and  known  ability  rather  than  for  special  qualifications  as  a 
financier.  Lacking  the  practical  knowledge  gained  by  banking  experience, 
„  ^  he  still  refused  to  rely  upon  the  advice  of  those  who  had  that 

willing  to  rely  knowledge.  Congress,  by  the  Act  of  August  5th,  had  suspended 
on  the  advice  of  the  operations  of  the  Sub-Treasury  Act,  so  as  to  allow  the 
Secretary  of  the  Treasury  to  deposit  Government  funds 
in  solvent,  specie-paying  banks.  The  New  York  financiers  who  had  come  to 
the  Government’s  rescue  asked  the  Secretary  to  take  advantage  of  this 
measure,  in  order  not  to  disturb  the  reserve  of  the  associated  banks. 
James  Gallatin,  president  of  the  National  Bank  of  New  York,  urged  him 
with  especial  earnestness  to  do  so.  He  was  requested  to  take  the  money 
due  for  the  notes  by  the  simple  method  of  drawing  on  a  designated  bank, 
representing  the  associated  banks,  in  each  of  the  three  cities,  as  money  was 
needed,  and  promptly  disbursing  it.  It  is  difficult  to  see  how  a  better  plan 
than  this  could  have  been  devised.  But  Mr.  Chase,  with  remarkable 
supersensitiveness,  refused,  on  the  ground  that  the  public  creditors  might 
not  get  the  best  kind  of  money  under  such  an  arrangement. 

The  Secretary  has  left  posterity  his  own  explanation  of  his  attitude,  in 
his  letter  to  Mr.  Trowbridge,  which  Horace  White  quotes  in  “  Money  and 
Banking.  ’  ’  Here  is  the  excerpt :  “  ‘  In  what  funds  will  my  drafts 
The  Secretary’s  be  paid?’  I  asked.  ‘We  in  New  York  are  entirely  willing  to 
Ms* altitude. °f  PaY  in  c°in  ’  was  the  reply.  ‘  But  how  will  it  be  in  Boston  ? 

How  in  Philadelphia?  How,  if  you  in  New  York  give  a  draft- 
holder  a  cheque  on  a  Cincinnati  or  St.  Louis  bank,  will  the  cheque  be  paid  ?  ’ 
‘In  whatever  funds  the  holder  of  the  draft  or  cheque  is  willing  to  receive.’ 
‘That  is  to  say,’  I  answered,  ‘in  coin,  if  the  holder  insists  on  coin,  and  the 
bank  is  willing  to  pay  it,  but  in  bank  notes  if  he  will  consent  to  receive  bank 


LEGAL  TENDERS 


137 


notes.  I  cannot  consent  to  this, gentlemen.’  ”  Mr.  White’s  comment  on  the 
Secretary’s  stand  is  worth  adding:  “To  call  this  perilous  nonsense,”  he 
says,  “would  be  to  describe  it  in  very  moderate  terms.” 

One  thing  is  certain.  Whether  Mr.  Chase  thought  he  could  or  could  not 
consent  to  the  innovation  suggested  by  the  banks,  they  could  have  forced 
him  to  consent  to  it.  But  they  waived  their  rights  and  cheerfully  went  on 
with  the  task  to  which  they  had  agreed.  The  funds  were  drawn  by  the 
Secretary  a  long  time  before  the  Treasury  notes  were  ready  for  the  subscrib¬ 
ing  banks.  “In  the  light  which  has  been  shed  upon  the  Act  of  Congress 
referred  to,”1  says  Mr.  Coe,  “it  is  evident  that  undue  weight  was  given  to 
the  views  of  the  Secretary,  and  that  the  banks  would  have 
conferred  an  incalculable  benefit  on  the  country  had  they  ^I8*ake  of  the 
adhered  inflexibly  to  their  own  opinions.  But  the  pressure  of 
startling  events  required  prompt  decision,  and  the  well-known  intelligence 
and  patriotism  of  the  Secretary  gave  his  judgment  overwhelming  power. 
It  soon  became  manifest  that  in  consenting  to  have  their  hands  tied  and 
their  most  efficient  powers  restricted  while  engaged  in  these  great  opera¬ 
tions,  and  in  allowing  their  coin  reserves  to  be  wasted  by  pouring  them  out 
upon  the  community  in  a  manner  so  unnecessary  and  exceptional,  the 
banks  deprived  themselves  and  the  Government  of  the  ability  of  long  con¬ 
tinuing,  as  they  otherwise  could  have  done,  to  negotiate  the  national  loans 
upon  a  specie  standard.  The  first  great  error,  if  it  did  not  create  a  neces¬ 
sity  for  the  legal  tender  notes,  certainly  precipitated  the  adoption  of  that 
most  unhappy  expedient,  and  thereby  committed  the  nation  at  an  early 
date  to  the  most  expensive  of  all  methods  of  financiering.” 

The  banks  had  a  further  request  to  prefer,  which  was  also  supported 
by  excellent  reason.  They  desired  the  Secretary  to  refrain  from  issuing  the 
currency  notes,  payable  on  demand,  without  interest,  $50,000,000  of  which 
had  been  authorized  by  the  Act  of  July  17th.  Such  notes,  if  issued,  were 
bound  to  be  presented  to  the  Treasury  for  redemption,  and  would  constitute 
an  undesirable  drain  on  the  Government’s  coin.  Furthermore,  they  would, 
of  course,  be  offered  as  deposits  in  New  York,  Philadelphia  and  Boston. 
The  banks  understood  that  the  Secretary  would  keep  these  notes  back,  and 
commenced  to  pay  for  the  “seven-thirties”  at  the  rate  of  $5,000,000  every 
six  days.  So  long  as  the  demand  notes  were  kept  back,  the 
coin  paid  out  for  the  “seven-thirties”  drifted  back  to  the  The  currency 

1  notes  and  the 

banks,  taking  about  a  week  for  the  operation.  This  was,  of  coin  reserve, 
course,  due  to  the  Government’s  prompt  disbursements  to 
meet  current  expenses.  By  December  7th,  when  more  than  $80,000,000 
had  been  paid  to  the  Government,  and  the  public  had  purchased  the  “seven- 
thirties”  to  the  amount  of  $50,000,000,  the  New  York  banks  had  lost  only 

1  That  of  August  5,  1861,  authorizing  the  suspension  of  the  Sub-Treasury  law. 


138 


THE  NEW  YORK  STOCK  EXCHANGE 


$7,415,380  in  coin  out  of  the  reserve  of  $49,733,990  with  which  they 
started  operations.  The  demand  notes  suddenly  began  to  come  out.  In 
short  order  their  holders  presented  them  for  deposit  in  the  various 
associated  banks. 

Here  was  a  most  distressing  dilemma.  If  the  banks  refused  to  accept 
these  demand  notes  on  deposit,  they  would  weaken  the  public  confidence  in 
the  Government’s  credit,  thereby  hindering  the  absolutely  necessary  work 
of  selling  the  interest-bearing  notes.  If  they  accepted  them,  on  the  other 
hand,  they  would  materially  cut  down  the  coin  percentage  which  they  held 
against  their  liabilities.  They  decided  to  accept  them  and  staggeralong  for 
a  while  under  the  load.  But  as  the  Government  was  now  paying  out  paper 
obligations  to  army  contractors  in  large  proportion,  the  re- 
Assodated  banks  flux  Gf  coin  to  the  banks  diminished  sharply.  In  the  three 
pendtp^iepay-  weeks  succeeding  December  7th,  the  reserves  in  the  New  York 
ment.  banks  fell  from  $42,318,610  to  $29,357,712.  The  associated 

banks  still  held  an  aggregate  reserve  of  $40,000,000,  but  they 
foresaw  that  it  would  be  speedily  wiped  away  if  they  omitted  to  take  drastic 
action.  On  December  28th,  after  a  conference  with  Secretary  Chase,  they 
suspended  specie  payment. 


Friction  with 
England. 


^f^EANWHILE  the  Government  had  got  together  an  army  of  about 
Wm/J  575,000  men.  Varying  success  had  attended  the  national  flag.  A 
Union  fleet  had  captured  the  fine  harbor  of  Port  Royal,  South 
Carolina ;  the  Confederate  general,  Price,  had  been  driven  out  of  Missouri, 
and  the  secession  forces  had  been  routed  at  Dranesville,  Virginia;  but 
General  Stone’s  command  had  been  decisively  beaten  at  Ball’s  Bluff,  and 
trouble  had  arisen  with  Great  Britain  over  the  seizure  of 
Mason  and  Slidell,  the  Confederate  emissaries,  on  the  British 
mailship  “  Trent”  (which  was  carrying  them  to  Southampton), 
by  Captain  Wilkes,  in  command  of  the  “  San  Jacinto.”  England  at  once 
resented  this  action,  and  the  two  nations  seemed  on  the  brink  of  war,  when 
the  President  decided  to  surrender  the  prisoners.  The  entire  trend  of  events 
had  been  such  as  to  convince  the  North  that  no  easy  task  confronted  the 
Government,  and  to  impress  sharply  on  official  minds  the  need  of  some 
far-reaching  financial  measures.  Secretary  Chase  believed  that  it  was 
impracticable  to  float  just  then  any  larger  number  of  interest-bearing 
obligations  than  had  been  arranged  for  with  the  associated  banks.  There 
were  only  two  other  ways  of  raising  money — inasmuch  as  the  impressment 
system  was  out  of  the  question — taxation,  and  the  issue  of  irredeemable 
legal  tenders  or  greenbacks. 

It  has  been  pointed  out,  with  considerable  emphasis,  that  the  Govern- 


LEGAL  TENDERS 


139 


ment  did  not  really  have  much  choice.  Taxation  and  the  issuance  of  bonds 
were  too  slow,  we  are  told.  The  gross  expenditures  of  the  nation,  which 
amounted  to  only  $77,000,000  in  1860  and  $85,000,000  in  1861,  were 
destined  to  leap  to  $565,667,563  in  1862,  and  to  aggregate  the  astound¬ 
ing  total  of  $1,906,433,331  in  1865.  Money,  or  some  substitute  for 
money,  was  needed  at  once  to  prosecute  the  war,  and  the  only  way  to  get  it 
was  to  make  it.  Admitting  this  view,  and  waiving  for  a  moment  the  fact 
that  the  leading  financiers  of  the  country  objected  to  the  legal 
tender  issue,  we  may  still  be  pardoned  for  asking  why  Congress  gal  tender 
did  not  use  its  best  powers  to  keep  this  new  currency  at  par, 
or  why,  after  affording  it  a  prop,  the  statesmen  at  Washington  decided, 
suddenly,  to  cut  the  prop  away  ?  Had  the  Government  succeeded  in  using 
its  promises  to  pay  at  their  full  value,  and  enabling  all  into  whose  hands 
they  fell  to  do  the  same,  no  criticism  of  their  issue  would  have  been  valid, 
the  Gold  Room  would  never  have  come  into  being,  and  the  expenses  of  the 
war  would  never  have  been  multiplied  by  the  tremendous  prices  which 
reflected  a  depreciated  paper  currency  and  enriched  an  unscrupulous  body 
of  army  contractors  out  of  the  people’s  treasury. 

Resort  was  had  in  some  measure,  to  be  sure,  to  increased  taxation. 
The  Morrill  tariff,  designed  really  as  a  protective  measure,  had  increased 
the  customs  duties  in  1861.  Eventually  taxes  were  levied  on 
trades,  professions,  and  other  occupations,  on  liquors  and  war  taxation, 
tobacco,  on  yearly  incomes  exceeding  $800,  on  bank  checks, 
and  on  patent  medicines.  But  the  Government  was  not  free  from  the  belief 
that  the  art  of  taxation  consists  of  plucking  the  greatest  amount  of 
feathers  with  the  least  amount  of  squealing.  The  country,  it  was  believed, 
would  not  stand  being  taxed  for  the  entire  cost  of  the  war.  At  any  rate 
the  experiment  was  not  tried.  When  it  became  evident  that  Mr.  Chase 
favored  the  issue  of  the  legal  tenders,  a  delegation  of  bankers  from  New 
York,  Philadelphia,  and  Boston  went  to  Washington  to  protest  against  it. 
On  January  11,  1862,  they  held  a  meeting  in  Secretary  Chase’s  office. 
James  Gallatin  offered  a  plan — the  issue  of  six  per  cent,  twenty-year 
bonds — by  which  the  legal  tenders  could  be  avoided.  The  banks  were  not 
able  to  provide  for  any  further  loans,  but  Mr.  Gallatin  proposed  that  these 
bonds  be  sold  in  the  open  market  for  what  they  would  bring.  Mr.  Chase 
refused  to  consider  the  idea  of  selling  Government  bonds  at  sixty  or  seventy- 
five  cents  on  the  dollar.  Could  he  have  foreseen  the  day  when  greenbacks — 
all  of  which  must  ultimately  be  put  on  a  par  with  gold — would  be  worth 
between  thirty-four  and  thirty-five  cents,  as  measured  in  the  precious  metal, 
he  might  have  taken  a  different  view.  The  bankers  suggested  that  if  an 
irredeemable  paper  currency  was  absolutely  needed,  they  might  issue  it,  to 
the  amount  of  $200,000,000,  based  on  the  $40,000,000  of  gold  still  in  their 


140 


THE  NEW  YORK  STOCK  EXCHANGE 


reserve  and  $160,000,000  of  Government  bonds.  This  plan  was  not 
approved.  The  legal  tender  measure,  which  had  been  proposed  by 
Elbridge  G.  Spaulding,  of  Buffalo,  and  introduced  by  Thaddeus  Stevens,  of 
Pennsylvania,  leader  of  the  House,  received  Mr.  Chase’s  sanc- 
Legai  tender  tion,  and  became  a  law  on  February  25,  1862.  It  provided 
measuiebec°in,'s  an  iggue  $150,000,000  in  greenbacks,  and,  through  an 

amendment,  tacked  on  by  the  Senate,  authorized  the  Secretary 
to  sell  six  per  cent,  bonds  at  their  market  value  to  an  amount  necessary  to 
provide  pay  for  the  soldiers.  Mr.  Chase 
later  had  occasion  to  take  advantage 
of  this  amendment,  when  back  pay  to 
the  amount  of  $59,000,000  was  due  the 
soldiers  in  December,  1862,  but  he  re¬ 
fused  to  do  so,  declaring  that  he  could 
not  sell  the  bonds  except  below  their 
market  value,  by  which  he  meant,  of 
course,  that  a  large  offering  of  bonds 
would  break  the  price. 

On  July  11,  1862,  additional  legal 
tenders,  amounting  to  $150,000,000, 
were  authorized  at  Secretary  Chase’s 
request.  The  new  measure  provided  a 
prop  for  this  paper  currency,  supple¬ 
menting  one  which  had  been  provided  in 
the  Act  of  February  25th.  Notes  of 
both  these  issues  were  made  exchange¬ 
able  at  par  for  six  percent,  gold  bonds.  Secretary  Chase,  desiring  to  make  a 
better  market  for  his  bonds,  asked  that  this  privilege  be  taken 
Congress  repeals  awav  Congress  obliged  him  by  the  Act  of  March  3,  1863, 

a  wise  piece  of  “  ° 

legislation.  which  authorized  the  issuing  of  $150,000,000  in  new  legal 
tenders  (providing,  however,  that  only  $400,000,000,  all  told, 
of  this  class  of  currency  should  be  issued,  excepting  such  an  additional  sum, 
not  to  exceed  $50,000,000,  as  might  be  required  to  redeem  temporary 
loans),  and  fixed  the  date  at  which  the  privilege  of  exchanging  the  legal 
tenders  for  bonds  should  cease  as  July  1,  1863.  The  abrogation  of  the 
funding  prerogative  was  undoubtedly  one  of  the  greatest  blunders  of  the 
war  period. 

Two  other  kinds  of  legal  tender  notes  were  issued  in  the  course  of  the 
war:  interest-bearing  Treasury  notes,  which  were  hoarded  for  their  coupons, 
and  six  per  cent,  compound  interest  notes.  The  latter  class,  of  which 
$226,000,000  were  issued,  were  payable  in  three  years,  with  interest  com¬ 
pounded  semi-annually  at  six  per  cent.,  a  ten-dollar  note  being  worth 


\ 


SALMON  P.  CHASE. 


LEGAL  TENDERS 


141 


$11.94  at  maturity.  It  may  be  noted  here  that  the  amount  of  greenbacks 
outstanding  on  August  31,  1865,  a  few  months  after  the  war’s  close,  was 
$433,160,569.  Secretary  McCulloch,  who  succeeded  Mr.  Chase  in  1864, 
recommended  the  retirement  of  greenbacks  by  the  cancellation  of  a  certain 
portion  of  those  received  in  taxes.  A  law  was  passed  to  effect  such  a  retire¬ 
ment  at  the  rate  of  $4,000,000  a  month,  but  this  measure  was  repealed 
when  the  greenbacks  outstanding  had  been  reduced  to  $356,000,000. 

One  important  service  of  the  associated  banks  should  be  noticed  before 
we  examine  the  lurid  picture  of  gold  speculation.  The  first  Government 
loan  which  came  due  after  the  birth  of  the  legal  tenders  was  a  debt  of 
$8,000,000,  contracted  in  1842.  It  was  payable  on  January  1,  1863.  The 
Government  did  not  have  the  money  on  hand  to  pay  it.  It  was  a  time  of 
great  anxiety.  The  year  1862  had  by  no  means  been  a  glowing  record  of 
Union  successes.  General  Thomas  had  achieved  an  important  victory  in 
January  at  Mill  Spring,  driving  the  Confederates  out  of  southeastern 
Kentucky ;  General  Grant  had  captured  Fort  Donelson  and  won  the  battle 
of  Shiloh ;  Rosecrans  had  defeated  Price  and  Van  Dorn  at  Corinth,  and  the 
capture  of  Memphis  and  New  Orleans  had  given  the  Union  virtual  control  of 
the  Mississippi  River.  Lee’s  army  had  retreated  from  Maryland  after  the 
battle  of  Antietam.1  But  against  these  encouraging  results  were  recorded 
the  unfortunate  Peninsula  campaign  of  McClellan,  who  had  succeeded 
General  Winfield  Scott  in  the  command  of  the  United  States  Army ;  Pope’s 
defeat  in  the  second  battle  of  Bull  Run;  “ Stonewall”  Jackson’s  brilliant 
operations  in  the  Shenandoah  Valley,  and  the  severe  Union 
repulse  at  Fredericksburg  in  December.  The  stability  of  the  An  hour  when 
Government  was  in  question.  It  was  imperative  that  it  Neatly  deeded 
should  pay  its  debts  in  gold.  The  Treasury  officials  debated 
till  the  last  hour.  Then  Mr.  Cisco,  Assistant  Treasurer  of  the  United  States, 
appealed  to  the  bankers  of  this  city.  They  furnished  the  required  gold 
upon  the  assurance  that  the  loan  would  be  repaid  out  of  the  country’s 
revenues  as  soon  as  possible. 


SHERE  were  two  important  reasons  operating  to  depreciate  the  value 
of  the  greenbacks.  The  first  was  lack  of  confidence  in  the  Govern¬ 
ment’s  strength  and  future,  a  condition  that  varied  with  the  vary¬ 
ing  success  of  Union  arms — a  rise  in  gold,  or  conversely,  a  fall  in  greenbacks, 
following  the  news  of  every  Confederate  victory,  and  a  fall  in  gold  coming 
upon  the  heels  of  each  new  triumph  for  the  Stars  and  Stripes.  Doubt  as  to 
the  ultimate  certainty  of  the  Government’s  redemption  of  the  legal  tenders  at 
par  naturally  was  commingled  with  doubt  as  to  the  possibility  of  preserv- 

1  Antietam  was  the  occasion  of  Lincoln’s  conditional  emancipation  proclamation,  which  became 
effective  on  January  1, 1863,  and  gave  freedom  to  the  slaves  in  territory  controlled  by  Confederate  forces. 


142 


THE  NEW  YORK  STOCK  EXCHANGE 


ing  the  Union,  and  the  Gold  Room  activity  lasted  for  twelve  years  after  the 
actual  end  of  the  war.  In  addition  to  this  wavering  public  confidence  there 
was  the  natural  tendency  of  an  inconvertible  and  inelastic  currency  to 
depreciate  whenever  its  bulk  was  too  great  for  the  normal  needs  of  trade. 
Before  the  birth  of  legal  tenders,  if  the  country  had  a  greater  stock  of 
gold  on  hand  than  it  required,  the  excess  flowed  naturally  to  those  parts 
of  the  world  where  it  was  most  needed,  and  which  indicated  their  need  by 
stiffening  money  markets  and  by  the  ordinary  fluctuations  of  foreign 
exchange.  A  lack  of  gold  was  naturally  supplemented  by  an  influx  from 
abroad.  In  other  words,  things  went  on  then  just  as  they  do  now.  But 
when  the  legal  tenders  appeared  there  came  a  change.  These  notes  would 
be  funded  in  bonds  whenever  the  Government’s  credit  was  high  enough  for 
its  bonds  to  sell  above  par.  But  this  privilege  only  lasted  till  July,  1863, 
and,  counting  it  out,  there  was  absolutely  no  means  of  getting  rid  of  an 
excess  of  the  greenbacks.  They  accordingly  came  to  depre- 
the  greenbacks.  ciaJe>  and  thereupon  drove  gold  entirely  out  of  circulation. 

Thereafter  the  fluctuating  demands  of  trade  were  effective  in 
lowering  or  raising  the  value  of  greenbacks,  which  were,  it  will  be  seen,  the 
puppets  of  two  entirely  different  currents  of  influence. 

Depreciation  of  the  country’s  money,  of  course,  worked  a  rise  in  the 
prices  of  everything  else,  gold  included.  But  merchandise  rose  more  rapidly 
than  gold,  for  the  merchant  added  an  extra  margin  to  cover  the  risks  of 
the  time.  Wages,  as  they  always  do  in  a  general  rise  of  prices,  advanced 
much  more  slowly  than  did  the  prices  of  most  of  the  things  the  wage- 
earners  had  to  buy.  Farmers  found  that  their  produce,  the  price  of  which 
was  fixed  chiefly  in  the  markets  of  Europe,  did  not  receive  a  due  proportion 
Unfair  work  ^ie  general  enhancement.  Creditors  of  every  sort,  from  the 

ings  of  the  widow  with  her  little  nest  egg  in  the  savings  bank  to  the  great 
altered  standard  money-lending  institutions  of  a  city,  were  cheated  by  the 
change,  and  the  Government,  putting  out,  at  depreciated  rates 
of  value,  the  notes  it  must  eventually  redeem  at  par,  was  cheated  most  of 
all.  Trade  became  a  gamble.  The  gamester’s  fever  surged  in  the  brains  of 
the  merchant,  the  banker,  the  professional  man,  and  the  salaried  clerk. 
The  same  false  measure  that  robbed  one  man  enriched  another,  and,  as  in 
previous  periods  of  the  country’s  history,  prodigal  expenditure  marked  the 
easy  getting  of  wealth,  including  among  its  most  shining  examples  the 
men  who  had  fattened  on  Government  contracts.  The  war  stimulated 
an  enormous  production,  and  while  property,  to  the  value  of  billions  of 
dollars,  was  being  consumed  in  the  work  of  slaughter  the  nation  believed 
that  it  was  highly  prosperous.  The  period  boded  a  reckoning  as  inevitable 
as  nightfall,  one  which  would  provide  a  gloomy  contrast  to  the  garish  light 
of  luxurious  living  that  seemed  so  desirable  while  it  lasted. 


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Put  T 


SHINPLASTER5 


LEGAL  TENDERS 


143 


SagpgjHE  financial  requirements  of  the  Government,  in  the  time  of  Secretary 
1  m  Chase’s  administration,  produced  a  new  institution,  which  has 
proved  a  permanent  benefit.  This  was  the  national  bank  system, 
created  by  the  Act  of  February  15, 1863,  which  was  amended  in  June,  1864. 
Mr.  Chase  deserves  the  credit  of  securing  the  passage  of  this  measure.  His 
support  of  it  was  based  upon  a  desire  to  broaden  the  market 
for  Government  bonds.  The  new  law  compelled  all  banks  Natlonal  baak 

.  .  .  .  .  .  system  estab- 

maintainmg  a  note  circulation  to  secure  their  notes  by  these  u9hed. 
bonds.  To  do  this  they  transformed  themselves  from  State 
banks  into  national  banks.  As  institutions  of  the  latter  class,  they  were 
obliged  to  deposit  Government  bonds,  varying  in  quantity  in  proportion 
to  their  respective  capitalizations,  in  the  United  States  Treasury.  Each 
national  bank  was  privileged  to  issue  its  notes  to  an  amount  equal  to 
ninety  per  cent,  of  the  market  value  of  the  bonds  thus  deposited.  The 
notes  were  receivable  in  payment  of  all  dues  to  the  Government  except 
imposts.  The  banks  in  certain  designated  cities,  known  as  reserve  cities, 
had  to  keep  a  reserve  of  lawful  money  equivalent  to  twenty-five  per  cent, 
of  their  respective  capitalizations.  For  smaller  cities  the  requirements 
were  fifteen  per  cent.  Any  bank  in  a  “  reserve  city  ”  might  keep  one-lialf 
of  its  reserve  on  deposit  in  a  national  bank  in  a  “central  reserve  city”  — 
New  York,  Chicago,  or  St.  Louis.  The  banks  were  forbidden  to  over-certify 
checks,  and  were  obliged  to  pay  a  tax  of  one  per  cent,  on  the  average 
amount  of  circulation  outstanding.  On  the  notes  of  State  banks  there 
was  imposed  a  tax  of  ten  per  cent.,  which  was,  of  course,  prohibitive.  These 
were  the  salient  provisions  of  a  measure  of  the  first  importance. 


X 

TKADING  IN  GOLD 

EALING  in  gold  was  not  popular  on  the  New  York  Stock  and 
Exchange  Board  even  during  the  brief  period  in  which  it  was 
tolerated.  The  members  of  the  Board  were  bearish  on  the 
metal,  with  notable  consistency,  because  their  loyal  support 
of  the  Government  carried  with  it  a  belief  that  the  Union 
forces  were  sure  to  succeed.  Their  tendency  to  sell  gold 
freely,  starting  as  it  did  before  the  greenback  depreciation  had  become  very 
marked,  was  not  profitable  in  succeeding  months,  which  witnessed  an 
increase  of  the  gold  premium.  Buying  gold,  the  open  evidence 
The  Exchange’s  Gf  distrust  of  the  nation’s  credit,  did  not  appeal  to  them  as  a 
in^war^time^6  mark  of  good  citizenship,  and  before  long  they  abolished  all 
dealings  in  the  metal  on  the  Board. 

No  class  of  the  community  took  a  more  loyal  stand  than  the  stock 
brokers  of  this  city.  On  April  17, 1861,  three  days  after  the  surrender  of 
Fort  Sumter,  the  Board  passed  these  resolutions : 

“  Resolved ,  That  we,  the  members  of  the  New  York  Stock  Exchange, 
impressed  with  a  deep  sense  of  the  duty,  which  should  animate  every  heart, 
of  sustaining  the  Government  of  the  United  States  in  the  support  of  the 
Constitution  and  laws,  desire,  in  this  period  of  public  exigency,  to  give 
encouragement  to  the  Government  by  pledging  our  fidelity  to  the  Union, 
and  our  resolute  determination  to  stand  by  it  under  all  circumstances ;  and, 

“  Resolved ,  That  a  committee  of  five  be  appointed  by  the  New  York 
Stock  Exchange,  to  cooperate  with  the  Committee  of  Citizens  of  New  York 
at  a  meeting  to  be  held  at  the  Chamber  of  Commerce  this  day.” 

On  the  following  day  the  brokers  voted  $1,000  to  the  Seventh  Regiment, 
about  to  start  for  Washington,  and  one  day  later  passed  resolutions  com- 


TRADING  IN  GOLD 


145 


mending  three  members  of  the  Board,  B.  M.  Nevers,  Peyton  Jandon,  and 
Frank  Jandon,  who  marched  away  with  the  Seventh.  On  April  20th  the 
organization  committed  itself  as  follows : 

“  Resolved ,  That,  in  the  present  condition  of  the  country  the  Board  will 
use  all  the  money  in  the  treasury  to  sustain  the  Government.” 

On  May  11th  the  Board  forbade  its  members,  under  pain  of  expulsion, 
to  deal  in  securities  of  any  seceding  State,  issued  subsequent  to  its  rebellion. 
There  was  an  active  market  on,  and  the  brokers  certainly  could  afford  to 
do  without  the  issues  thus  put  under  the  ban.  They  showed  no  inclination 
to  admit  too  many  new  members  into  their  organization.  In 
1861  twenty-nine  candidates  were  voted  for,  seventy-six  ballots  Commission1  ^ 
being  taken,  and  only  seven  new  members  were  elected.  Busi-  charge  now 
ness  was  so  brisk  that  it  was  possible  to  make  a  handsome  bmdmg- 
income  at  a  lower  commission  charge  than  one-quarter  of  one  per  cent.,  the 
minimum  previously  made  binding.  It  had  been  cut  on  many  occasions, 
and  the  Board  in  this  year  substituted  for  it  the  present  commission 
charge,  an  eighth  of  one  per  cent. 

Less  than  a  hundred  members  were  accustomed  to  gather  at  the 
sessions  of  sixty-one.  W.  R.  Vermilye  was  president  of  the  organization. 
Lord’s  Court,  the  Board  room  (which  was  approached  through  intricate 
passages),  was  a  crowded  scene  on  busy  days.  The  rostrum,  at  one  end  of 
the  chamber,  ran  nearly  the  length  of  the  row  of  four  high,  arched  windows 
behind  it.  Above  the  head  of  the  presiding  officer  hung  an  American  flag, 
fixed  to  a  staff  projecting  from  the  midst  of  the  drapery  with  which  the 
windows  and  wall  were  festooned.  Tables  ornamented  with  inkstands  ran 
lengthwise  through  the  room,  and  here  sat  members  scribbling  memoranda 
or  following  the  bids  and  offers  as  each  security  was  called.  Others  crowded 
into  the  spaces  between  the  tables,  and  each  man  rose  from  his  seat  when¬ 
ever  he  had  occasion  to  take  an  active  part  in  the  market. 

1  The  chimney-pot  hats  of  the  decade  previous  still  flourished, 
though  a  trifle  lower  in  the  crown.  They  contrasted  here  and 
there  with  soft,  round  specimens  of  headgear,  resembling  somewhat  the  flat, 
black  hats,  now  favored  by  a  portion  of  the  clergy,  and  most  conveniently 
designed  to  skim  throilgh  the  air  with  buoyancy  and  speed  when  tossed 
away  by  a  facetious  neighbor.  Practical  jokes  enlivened  the  monotony  of 
a  dull  period  of  trading,  and  a  serious  man  wTould  have  cause  to  wonder 
betimes  at  the  levity  of  his  fellows,  being  thoroughly  disgusted  that  he 
could  not  enjoy  a  quiet  discussion  of  the  money  market  or  the  latest  news 
from  the  front  without  learning  that  some  light-witted  member  had  pinned 
an  unseemly  poster  to  his  respectable  coat-tails. 

lSee  illustration  on  page  120. 


146 


THE  NEW  YORK  STOCK  EXCHANGE 


Adjoining  the  Board  room  was  a  sort  of  annex,  leased  by  an  outsider, 
and  known  as  Goodwin’s  room,  where  certain  affiliated  operators  revelled 
in  a  speculation  of  their  own.  A  delegate  from  this  body,  for  a  considera¬ 
tion,  was  permitted  to  occupy  a  high  stool  in  the  vestibule  of  the  Board 
room  and  listen  through  the  keyhole  to  the  dealings  taking  place  within. 
He  would  shout  back  the  successive  quotations  to  his  associates  in  Good¬ 
win’s,  and  on  this  basis  their  market  was  conducted.  The  members  of  the 
Board  looked  down,  from  an  immeasurable  height,  upon  the  motley  crowd 
in  the  annex;  but  this  troubled  the  outsiders  very  little. 
Two  kinds  of  «  Larry  ”  Jerome,  afterward  famous  as  a  wit  and  good  fellow 
Goodwin’s  room,  among  the  members  of  the  Board,  wras  a  leader  m  the  annex 
coterie.  When  things  were  dull,  he  and  others  who  shared  his 
happy  spirits  betook  themselves  to  the  consolations  of  “crack -loo”  — 
pitching  half-dollars  at  a  crack  in  the  floor,  upon  the  understanding  that 
the  best  marksman  won  the  stakes.  Excitement  waxed  warm  over  “  crack- 
loo,”  but  the  sport  was  likely  to  be  interrupted  at  any  moment  by  a  spurt 
of  market  activity,  which  would  draw  the  participants  back  into  the  whirl 
of  stock  speculation.  The  securities  mart  having  again  relapsed  into  quiet, 
Jerome  and  his  friends  would  return  to  their  trials  of  skill,  and  play  as 
hard  for  fifty-cent  stakes  as  they  had  played  a  moment  before,  when 
thousands  of  dollars  were  involved. 

A  third  market  was  afforded  by  the  open  street,  where  all  who  cared  to 
buy  or  sell  met  in  a  promiscuous  throng  and  kept  stocks  active  between 
the  calls.  The  meeting  place  was  in  William  Street,  between  Exchange 
Place  and  Beaver  Street.  This  market  differed  from  the  curb  of  to-day,  for 
it  was  not  confined  to  securities  unlisted  on  the  Exchange.  It  was,  in  fact, 
used  by  members  of  the  Board  (many  of  whom  were  elderly, 
prominent  and  influential  men  and  heads  of  firms)  to  execute 
orders  which  could  not  be  attended  to  at  the  calls.  With  the 
broadening  of  the  public  interest  in  the  speculative  movement  this  street 
mart  expanded.  The  Board  members,  who  felt  that  they  had  performed 
as  much  physical  work  as  was  compatible  with  age  and  dignity,  when  they 
had  marched  solemnly  into  Lord’s  Court  before  every  call — each  man 
followed  by  a  youth  who  bore  a  formidable  book  for  the  chronicling  of 
transactions — and  marched  back  again  afterward,  placed  their  curb 
orders  in  the  hands  of  younger  and  nimbler  brokers.  Between  the  calls  in 
their  respective  offices  the  members  had  their  record  books  displayed  to 
the  view  of  customers.  If  any  one  possessed  of  sufficient  capital  was 
inspired  by  a  study  of  the  record  to  undertake  an  immediate  venture  in 
the  market,  his  order  would  be  promptly  transmitted  to  William  Street. 
During  the  calls  the  street  market  was  suspended.  No  record  of  its  trans¬ 
actions  was  kept  by  any  one ;  but  they  were  admittedly  of  enormous  scope, 


Market  in 
William  Street. 


TRADING  IN  GOLD 


147 


for  they  constituted  the  only  continuous  trading  in  this  city  at  a  time 
when  the  Northern  public  seemed  to  have  gone  fairly  wild  over  speculation, 
while  Southerners  who  had  come  North  to  await  the  cessation  of  hostilities 
added  to  the  excitement  by  their  bold  operations  in  securities  and  gold. 

The  Stock  Exchange,  as  it  was  generally  known  at  this  period — the 
title  of  the  organization  was  changed  from  The  New  York  Stock  and 
Exchange  Board  to  The  New  York  Stock  Exchange  on 
January  29,  1863  —  was  managed  during  war  times  on  very  adopts  it^86 
different  lines  from  those  of  to-day.  In  place  of  a  governing  present  name, 
committee  the  Exchange  formed  a  committee  of  the  whole  in 
all  matters  of  legislation.  Questions  to  be  voted  upon  were  brought  up 
directly  after  the  morning  call,  at  a  time  when  every  member  was  anxious 
to  hurry  back  to  his  office,  see  his  customers,  and  make  arrangements  for 
such  orders  as  were  to  be  executed  in  the  street.  As  a  consequence  very 
few  waited  to  unite  in  judgment  upon  a  pending  proposition.  When  any 
measure  had  been  passed  which  aroused  extensive  antagonism,  its  oppo¬ 
nents  would  agree  upon  a  day  in  which  to  remain  for  the  legislative  session 
and  carefully  undo  what  had  just  been  done.  This  made  it  look  as  if  the 
Board  did  not  know  its  own  mind.  Every  applicant  for  re-admission  and 
every  case  for  arbitration  had  to  come  up  before  a  special  committee,  whose 
reports  w?ere  acted  on  by  the  Board  at  secret  meetings.  The  only  standing 
committee  was  the  “  Committee  on  Securities,”  which  passed  on  stocks  and 
on  bonds.  Neither  ticker  nor  Atlantic  cable  as  yet  was  at  the  service  of  the 
brokers.  Until  1864,  when  the  present  practice  of  delivering  by  certificate 
was  adopted,  every  sale  of  shares  had  to  be  consummated  by  a  transfer  on 
the  books  of  the  company  concerned,  and  brokers  were  forced  to  crowd  the 
transfer  offices  late  in  the  day  to  attend  to  this  annoying  detail.  Seats  on 
the  Board,  were  remarkably  cheap  by  contrast  with  the  prices  they  now 
command.  “In  October,  1861,”  says  ex-President  Eames,  “the  Treasurer 
of  the  Board,  Mr.  James  W.  Bleecker,  died,  and  his  right  to  occupy  a  chair 
in  a  desirable  place  was  put  up  at  auction,  for  charity,  and  sold  for  $460. 
The  Board  decided  that  a  member’s  right  to  occupy  a  particular  seat 
continued  for  life.  A  desirable  seat  wras  subsequently  sold  for  $1,000. m 
The  initiation  fee  was  raised  in  1864  to  $3,000,  except  for  those  who  had 
been  clerks  to  members  for  at  least  three  years.  For  these  applicants  it 
was  $1,500. 

The  lack  of  provision  for  a  continuous  market  of  its  own  was  a  serious 
defect  in  the  Board’s  management.  Naturally  conservative  in  their  views, 
the  members  were  little  anxious  to  conform  their  methods  to  the  demands 
of  the  new  era,  and  those  demands  were  supplied  by  other  agencies.  The 
“Coal  Hole,”  the  Open  Board  of  Stock  Brokers,  and  the  evening  exchanges 

1  The  New  Tore  Stock  Exchange  :  Francis  L.  Eames.  New  York.  1894. 


148 


THE  NEW  YORK  STOCK  EXCHANGE 


were  evolved  out  of  the  popular  speculative  excitement.  Men  were  not  sat¬ 
isfied  with  normal  working  hours.  They  rushed  into  the  arena  from  a 
hurriedly  snatched  breakfast,  shouted  and  wrestled  throughout  the  day, 
stealing  a  few  moments  to  sustain  vitality  and  encourage 
craving  indigestion  at  a  lunch  counter  or  restaurant,  and  renewed  the 

desperate  tension  in  the  evening,  prolonging  it  till  long  past 
the  hour  when  wearied  bodies  and  shocked  nerves  demanded  respite  and 
an  opportunity  to  prepare  for  the  next  day’s  trials.  It  was  a  killing  pace, 
and  the  marvel  is  that  it  was  kept  up  so  long.  Nowhere  was  it  so  fast 
or  furious  as  in  the  famous  gold  market,  which  for  the  last  quarter  of  a 
century  has  been,  fortunately,  nothing  but  a  memory.  Of  this  the  char¬ 
acter  and  accompaniments,  for  reasons  already  explained,  call  for  descrip¬ 
tion  before  adverting  to  the  other  evanescent  phases  of  speculation  that 
characterized  the  sixties. 


0  long  as  the  banks  were  paying  out  specie,  a  premium  on  gold  was, 
of  course,  out  of  the  question.  But  the  greenback  depreciation 
started  almost  immediately  after  the  fateful  December  28,  1861. 
The  events  that  led  up  to  the  suspension,  and  the  causes  that  impelled  the 
depreciation,  have  already  been  outlined.  Early  in  January  the  public 
noticed  that  the  dealers  in  bullion  were  demanding  a  small  premium  for 
gold  over  their  counters.  An  unpleasant  consciousness  that  this  premium 
had  come  to  stay  seemed  to  pervade  the  public  mind  at  once, 
for  gowemmm  and>  despite  the  impossibility  of  knowing  just  what  it  pres¬ 
aged,  the  speculative  world,  at  least,  comprehended  its  impor¬ 
tance.  A  few  days  later  a  new  commodity  was  added  to  the  list  of  the 
vehicles  of  speculation  on  the  Stock  Exchange — American  gold.  On  Janu¬ 
ary  13,  1863,  were  recorded  the  first  sales  of  gold  at  the  Board,  the 
prices  being  103  regular,  and  102%  and  102%  seller,  thirty  days.  The  prices 
established  at  the  calls  were  used  during  several  succeeding  months  for 
the  dealings  “  over  the  counter”  in  the  precious  metal. 

Board  members  became  disgusted  with  this  class  of  business  when  they 
found  it  impossible  to  combine  a  loyal  disposition  to  sell  gold  with  a 
natural  desire  to  make  a  profit,  and  the  new  commodity  was  exiled.  But  a 
market  for  it  was  imperative.  The  greenback  depreciation  had  begun  and 
was  extending.  The  question  was  not  whether  it  ought  to  exist;  it  did 
exist.  Bullion  dealers  realized  the  necessity  of  a  common  meeting  place. 
Having  been  shut  out  of  the  Stock  Exchange,  they  drifted  naturally  into 
William  Street,  and  double-eagles  circled  and  eddied  amid  the  flotsam 
and  jetsam,  the  solid  securities,  and  the  wild-cat  shares  of  the  busy  market 
curb.  Early  in  1862  the  Coal  Hole  was  established.  It  was  a  gloom}’-  base- 


TRADING  IN  GOLD 


149 


ment  at  No.  23  William  Street,  to  which  any  one  might  find  entrance  who 
paid  the  lessee  a  certain  annual  subscription.  Calls  were  begun  here  for  the 
benefit  of  brokers  who  were  not  members  of  the  Stock  Exchange,  and  the 
consequent  transactions  were  reported  in  the  newspapers  as 
“Sales  at  the  Public  Stock  Board.”  Gold  dealing  soon 
became  a  dazzling  feature  in  the  Coal  Hole  business.  But  it 
outgrew  the  narrow  limits  of  a  dingy  cellar.  In  1863  the 
specialists  in  the  precious  metal  migrated  to  a  place  set  apart 
for  their  exclusive  use,  Gilpin’s  news  room,  or  reading  room,  at  the  south¬ 
east  corner  of  William  Street  and  Exchange  Place.  Free  and  easy  methods 
still  prevailed.  Any  one  who  paid  $25  a  year  for  the  privilege,  and 
showed  a  willingness  to  fulfil  his  contracts,  might  trade  in  Gilpin’s  room. 


Gold  glimmers 
in  the  Coal  Hole 
and  later 
migrates  to 
Gilpin’s  room. 


4m 


Nature  and  con¬ 
ditions  of  gold 
speculation. 


N  understanding  of  the  character  of  the  gold  speculation  must  be 
reached  from  a  special  point  of  view.  It  was  based,  of  course,  upon 
the  fluctuating  value  of  Government  credit,  as  expressed  in  the 
legal  tender  notes,  and  its  popularity  was  widespread,  not  only  because  it 
afforded  such  rapid  fire  action,  but  because  the  uncertain  quality  of  the 
public  money  increased  the  speculative  element  in  all  legitimate  business 
and  turned  men  naturally  to  gambling.  To  be  accurate,  the  trading  in 
gold  was  really  trading  in  the  proportionate  values  of  two  things,  the 
metal  and  the  Government’s  promise  to  pay  metal.  Generally  speaking, 
the  former  was  stationary  in  price  and  the  latter  fluctuated.  The  stable 
quality  of  the  price  of  gold  is  notorious,  and  has  specially 
fitted  it  for  the  part  it  plays  in  the  world’s  industrial  system. 

So  we  must  consider  that  the  buying  of  gold  wras  really  the 
selling  of  greenbacks  in  the  expectation  of  a  decline  in  Govern¬ 
ment  credit.  But  the  profits  or  losses  of  the  transaction  were  measured  in 
the  fluctuating  commodity,  if  the  greenbacks  may  be  so  termed.  Further¬ 
more,  the  dealing  was  complicated  by  the  fact  that  gold  might  and  did 
fluctuate,  at  times,  just  like  any  other  form  of  wealth.  It  could  be  cornered, 
and  it  wras  cornered.  While  the  items  of  news  which  required  the  attention 
of  the  Gold  Room  were  principally  those  affecting  the  condition  and  future 
of  the  Government  credit,  still  those  which  might  influence  the  price  of  gold 
as  a  commodity  had  also  to  be  borne  in  mind.  In  fine,  this  speculation 
differed  from  all  other  kinds.  It  consisted  of  gambling  in  the  propor¬ 
tionate  values  of  a  comparatively  stable  metal  and  a  highly  fluctuating 
kind  of  paper,  each  subject  to  artificial  depressions  and  enhancements,  the 
profit  or  loss  being  commonly  measured  in  the  fluctuating  paper. 

In  addition  to  the  immediate  effects  of  Gold  Room  speculation,  it  had 
an  importance  to  the  country  at  large  never  paralleled  by  any  other  sort 


150 


THE  NEW  YORK  STOCK  EXCHANGE 


Labor  suffers 
through  the 
greenback 
depreciation. 


of  dealings.  The  fluctuations  of  the  legal  tenders  concerned  every  man  who 
had  a  direct  connection  with  the  business  world ;  in  other  words,  everybody 
but  paupers,  beggars,  inmates  of  prisons,  and  the  insane.  The  laboring 
man  and  the  salaried  clerk  watched  the  ascending  quotations  for  gold  with 
dismay.  For  these  it  meant  that  they  could  buy  less  with 
what  they  earned  than  formerly,  for  merchandise  rose  even 
more  rapidly  than  gold,  and  wages  rose  more  slowly  than 
either.  The  wage-earning  classes  could  only  look  and  hope. 
It  was  virtually  beyond  their  power  to  aid  themselves.  But 
the  merchants,  manufacturers,  jobbers,  planters,  and  professional  men, 
those  who  could  regulate  the  prices  of  what  they  had  to  sell,  followed  the 
course  of  gold,  in  order  to  determine  what  they  should  charge.  The  eyes  of 
the  nation  were  therefore  upon  the  Gold  Room,  and  an  artificial  movement 
in  the  price  of  the  metal  disturbed  the  business  arrangements  of  the 
country.  In  the  face  of  all  this  disturbance  there  appeared  to  spring  up  a 
new  era  of  prosperity.  It  was  not  fairly  shared  by  the  workingman,  a  fact 
which  alone  sufficed  to  demonstrate  its  unsound  character,  but  the  business 
man  revelled  in  it.  The  Government  was  producing  it  by  consuming 
enormous  supplies,  amounting  in  1865  to  the  equivalent  of  more  than 
$3,000,000  a  day,  while  removing  from  the  number  of  available  workers  a 
vast  body  of  men.  It  was  paying  big  prices  for  what  it  had  bought,  and 
piling  up  a  mountain  of  debt  in  order  to  do  so.  All  this  meant  inflation  of 
a  wholesale  character,  which  must  eventually  result  in  contraction.  The 
public  debt,  sooner  or  later,  would  have  to  be  paid  by  the  public.  But 
while  the  people  wrere  accumulating  powder  for  the  explosion  of  1873,  they 
seemed  to  think  that  they  were  enjoying  a  healthy  and  delightful  pros¬ 
perity.  They  indulged  in  lavish  expenditures,  led  by  the  class 
War  as  the  which  the  cheating  greenbacks  had  robbed  others  to  enrich, 
of  prosperity.  *  me  equipages,  fine  gowns,  fine  jewels,  and  fine  dinners  were 
the  order  of  the  day  in  the  metropolis.  The  florist,  the 
milliner,  the  purveyor  of  costly  trinkets  and  rare  perfumes,  found  a  ready 
market  for  their  wares.  They  wondered  why  they  had  never  guessed  how 
profitable  a  thing  it  was  for  a  nation  to  go  to  war. 


HHROUGHOUT  the  conflict  the  heaviest  speculative  orders  in  gold 
came  from  Washington.  Inasmuch  as  the  great  controlling  factors 
in  the  price  of  the  metal  were  the  success  or  failure  of  the  Union  arms, 
those  who  were  in  a  position  to  know  promptly  the  result  of  battles  had  an 
immense  advantage  in  point  of  speculation.  Politicians,  war  correspond¬ 
ents,  and  personal  friends  of  Government  officials  shared  in  this  privilege 
and  waxed  fat  at  the  expense  of  operators  less  desirably  equipped.  Balti- 


r' 

"  4 

r 

GOOD  FOR 

k 

Good  For  % 

GOOD  FOR  , 

1  Cent, 

i  Cent,  | 

One  Cent. 

I\  ROSE, 

5 

J.  FRIESENHAUSEN,  & 

“Live  and  Lel.Live'’ 

- - — - - — — * 

5 

27  Rose  Street.  D 

b,.!-  — . . . 

2i  1<  iK. 


<*.  /"■  ft;  ■e.^r  '%^r  a 

^  (;r  t>J>  FOR  f 

*ONE  CENT  l\ 

>.V  IN  TB A DKj  —  vr  -.5 

k.  rcJeeroable  iu  -urns, of  5  Ceuta  and 
%  upward^ 

4  CH.  0.  KOSEN’BKRGKli, 

New  Buffalo  Moat  Market. 


c~~ 


i»  KC  A  iTit  m  v  it  iv  i  :-r 

GOOD  FOR 

i  CEivr 

AT  G.  W.  ODELL’S, 

Cor-  ?"th  Street  and  1st  Av. 


Wimmi  r«»i' 


iwi.  lEC-A-iuvr, 

240  William  Street, 


GOOD 

1  CUNT, 

(it  QUIRIKER  KLEIN, 

27  Delaney  Street. 


W.  y.  Da  vis  &  Bro.,  Butchers 

r 

GOOD  FOR 

207  West  Madison,  Cor.  Carpenter  St. 

1  CENT 

GOOD  IFOIR. 

AT  MRS.  MEBBETT’S 

ONE  CENT 

News  Depot, 

In  trade,  or  redeemable 

120  First  Av-,  near  7th  St., 

in  sums  of  5  Cents  and  upwards. 

r 

.  - - - - i - E 

TICKETS  USED  BY  LOCAL  TRADESMEN  FOR  SMALL  CHANGE 


TRADING  IN  GOLD 


151 


more  and  Louisville,  both  in  close  touch  with  the  rebel  lines,  also  were 
accustomed  to  flash  heavy  orders  across  the  wires.  The  “  underground 
railroad  ”  became  a  pet  phrase  of  the  day.  It  designated  the 
peculiar  sources  of  advance  information  as  to  the  war’s  The  “under¬ 
progress  which  some  operators  had  at  their  command.  There  foad”Voes"a 
was  naturally  a  great  deal  of  misinformation  in  the  air.  A  heavy  business, 
certain  youthful  gold  broker,  who  was  for  many  years  after¬ 
ward  a  well-known  member  of  the  Stock  Exchange,  was  accosted  about 
noon  one  day  near  the  Gold  Room  by  a  pair  of  operators  on  their  way  to 
Delmonico’s : 

“Hello,  Blank!”  said  one  of  them,  “how  are  double-eagles  now?” 
“  Selling  about  140,”  was  the  answer.  The  operator  gave  a  heavy  order 
to  sell  double-eagles,  bearing  in  mind  an  important  piece  of  advance  infor¬ 
mation  relative  to  a  Union  victory,  and  departed  for  luncheon.  Unfortu¬ 
nately,  the  fact  was  that  the  battle  just  concluded  had  resulted  in  a  Union 
defeat.  An  hour  later  the  broker  met  the  pair  of  friends  returning  from 
their  mid-day  meal,  in  a  contented  frame  of  mind.  “How’re  double-eagles?” 
“Hundred  and  sixty,”  was  the  laconic  rejoinder.  It  was  a  bad  smash-up 
for  the  operator’s  underground  railroad. 

Gold  had  risen  to  120  on  July  21,  1862,  the  Peninsula  campaign  of 
McClellan  having  done  much  to  disquiet  Northern  minds.  By  December  4th 
it  had  risen  to  134,  and  on  January  31,  1863,  it  sold  at  160.  The  Wash¬ 
ington  party  were  now  actively  at  work,  and  their  favorite 
broker  became  known  to  the  speculative  public.  It  was  even  Advantages  of 

A  x  .  working  for  a 

alleged  that  one  private  secretary  at  the  national  capital,  great  man. 
whose  position  often  enabled  him  to  get  live  news  many  hours 
ahead  of  the  public,  made  a  fortune,  without  capital,  by  simply  telegraphing 
his  New  York  brokers  at  opportune  moments  to  sell  or  buy,  and  trusting  to 
their  integrity.  Having  a  brief  vacation,  he  took  a  train  for  this  city  one 
day,  and  learned,  at  the  office  of  these  brokers,  that  he  had  netted  a  fortune 
of  $280, 000. 1  Extravagant  stories,  however,  were  the  order  of  that  day. 

In  April,  1864,  Secretary  Chase  sold  several  millions  of  gold  in  this 
city,  putting  the  proceeds  into  the  Sub-Treasury.  This  operated  in  two 
ways  to  break  the  stock  market.  The  fall  in  the  price  of  gold,  which  carried 
down  all  sorts  of  merchandise,  also  carried  down  stocks,  and  the  locking 
up  of  so  much  money  in  Government  vaults  produced  a  stringency.  The 
result  was  the  Morse  panic,  of  which  we  shall  hear  something  later.  Mr. 
Chase’s  action  was  due  to  the  desire  to  help  Government  credit  by  lowering 
the  gold  premium,  but  the  bulls  soon  had  the  metal  on  the  ascent  again. 
On  June  17,  1864,  thirteen  days  before  Mr.  Chase  resigned,  Congress 
passed  a  measure  which  he  had  instigated  and  which  was  designed  to  kill 

*Men  and  Mysteries  of  Wall  Street:  James  K.  Medbery.  Boston.  1871. 


152 


THE  NEW  YORK  STOCK  EXCHANGE 


the  gold  speculation.  It  prohibited  the  sale  of  gold,  unless  the  seller  had  it 
and  delivered  it  the  next  day,  and  also  forbade  the  purchase  or  sale  of 
Government’s  f°reign  exchange  to  be  delivered  more  than  ten  days  subse- 
vain  efforts  to  quen tly,  and  the  loan  of  greenbacks  to  be  repaid  in  coin  or 

control  the  bullion,  or  vice  versa.  No  purchase  or  sale  of  gold,  bullion,  or 

foreign  exchange  could  be  made  except  at  the  ordinary  place 
of  business  of  the  buyer  or  seller.  A  fine  of  from  $1,000  to  $10,000,  or 
imprisonment  for  from  three  months  to  a  year,  or  both,  awaited  the 
violation  of  any  of  these  provisions. 

Mr.  Chase  designed  this  measure  to  shut  up  Gilpin’s  news  room,  and  it 
accomplished  the  purpose.  He  believed  that  the  price  of  gold  was  being 
shoved  up  by  malicious  speculators,  and  that  if  the  Gold  Room  were  closed 
the  metal  w’ould  fall  in  value.  Apparently  some  others  thought  so,  too — 
the  Washington  party,  it  is  likely — for  gold  was  sold  very  heavily  short. 
Gold  stood  at  198  on  the  day  the  measure  passed.  The  next  day  it  reached 
208,  to  the  consternation  of  the  bears,  and  the  following  day  it  touched 
230.  On  June  21st  the  measure  became  actually  effective,  and  the  Gold 
Room  was  closed.  Before  the  end  of  the  month  the  price  reached  250. 
Congress  became  alarmed  at  the  spectacle  of  a  gold  market  refusing  to  be 
regulated  by  statute.  The  Act,  which  had  seriously  hampered  legitimate 
commercial  buying,  was  repealed  on  July  2d,  but  the  corner  was  doing  its 
work.  Gold  had  risen  on  the  previous  day  to  285,  and  reacted  to  225  on  the 
news  that  the  bill  was  to  be  repealed.  On  July  11th  it  again  reached  285, 
the  highest  price  in  the  history  of  the  Gold  Room.  After  the  adjournment 
on  that  day  it  soared  to  still  higher  prices.  William  Limerick, 
a  banker  from  Lexington,  Missouri,  paid  310  for  gold,  to  the 
amount  of  $100,000,  under  the  evident  belief  that  the  country 
was  going  to  the  dogs,  and  that  he  must  do  what  he  could  to  save  a  rem¬ 
nant  of  his  fortune.  The  bulls  had  been  encouraged  in  their  efforts  by  the 
fact  that  they  construed  the  repeal  of  the  Act  as  a  Government  defeat.1 

Grant’s  campaign  against  Lee  in  Virginia  had  started  in  May,  and  the 
difficulties  he  experienced  in  the  Wilderness  and  at  Chickahominy  had  pro¬ 
duced  a  feeling  of  discouragement  in  the  North ;  but  the  high  price  of  gold 
did  not  merely  reflect  this  feeling.  It  was  the  result  of  the  corner.  By  the 
end  of  September  the  figure  had  fallen  to  191.  By  November  9th  it  had 
reached  260  again ;  but  Sherman  began  his  famous  march  to  the  sea,  cut¬ 
ting  off  Lee’s  source  of  supplies,  and  gold  never  afterward  rose  to  that 
figure. 

On  October  1,  1864,  the  gold  brokers  removed  to  a  room  at  the  north¬ 
east  corner  of  William  and  Beaver  streets,  which  E.  O.  Read  and  John 


Gold  selling 
at  310. 


1  The  Gold  Room  and  The  New  York  Stock  Exchange  and  Clearing  House: 
New  York.  1879. 


Kinahan  Cornwallis. 


TRADING  IN  GOLD 


153 


Bloodgood  had  leased.  The  lessees  charged  $200  a  year  for  admission  to 
the  chamber.  On  October  14th  the  holders  of  the  “Read  and  Bloodgood” 
tickets  organized  under  the  title  of  the  New  York  Gold  Exchange.  Outsiders 
who  were  elected  paid  an  initiation  fee  of  $200,  which  was 
eventually  raised  to  $2,500,  the  fee  for  broker’s  clerks  being  ^{r^lzatlon 
$1,500.  The  first  officers  were :  Henry  M.  Benedict,  president ;  Gold  Exchange. 
Thomas  P.  Akers,  first  vice-president;  Randall  H.  Foote, 
second  vice-president;  Joseph  Win  Moses,  secretary;  Theodore  Gentil, 
treasurer ;  S.  S.  Laws,  moderator.  Mr.  Akers  had  been  a  member  of  Con¬ 
gress  from  Tennessee,  and  at  one  time  was  a  Methodist  preacher,  noted  for 
zeal  and  eloquence.  He  possessed  a  powerful  physique,  and  a  contemporary 
narrator  tells  us  that  he  used  to  amuse  the  Gold  Room  a  few  years  later, 
whenever  trading  was  dull,  “by  taking  a  fair-sized  man  lightly  on  the  palm 
of  his  hand  and  holding  him  at  arm’s  length,”1  while  he  himself  remained 
seated  in  his  chair. 

The  fall  of  1864  and  the  succeeding  winter  were  busy  with  gold 
speculation  of  a  startling  character.  New  operators  added  themselves  to 
the  market.  Fluctuations  in  the  price  of  gold  wrere  violent,  and  a  few  men 
cleared  large  fortunes.  William  L.  Hoblitzel  sold  $1,000,000  in  a  single 
block  in  September,  and  covered  at  great  profit.  E.  A.  Corey  was  noted 
for  his  successful  bear  campaigns.  John  M.  Tobin,  a  financial  ally  of 
Commodore  Vanderbilt,  Charles  Kearney,  S.  T.  Suit,  and  Dr.  Shelton,  were 
among  the  keenest  traders  in  the  metal.  The  Gold  Exchange  fixed  its 
office  hours  at  from  10  o’clock  in  the  morning  to  3  in  the  afternoon. 
The  closing  hour  wras  frequently  altered  afterwTard,  and  members  dealt 
wffien  they  pleased.  Deliveries  were  made  at  first  in  bags  of  coin,  each 
containing  $5,000.  The  average  messenger  could  carry  twro  of  these  bags, 
and  a  strong  man  could  handle  four.  It  was  an  awkwrard 
method  of  delivery  and  a  hazardous  one.  Upon  a  certain  A  bad  8Pm  that 
occasion,  long  remembered  by  the  witnesses,  the  bag  which  a  woree- 
messenger  was  carrying  burst  and  a  wealth  of  yellow  metal 
poured  down  into  the  street.  Not  a  single  coin  was  lost.  The  brokers  who 
chanced  to  be  at  hand  formed  a  ring  about  the  embarrassed  carrier  and  he 
was  able  to  get  together  the  entire  amount  of  his  freight. 

The  danger  of  robberies  and  the  frequency  of  delayed  deliveries — for  the 
supply  of  gold  was  small  in  proportion  to  the  volume  of  speculation — 
demanded  some  sort  of  reform.  The  Gold  Exchange  enacted 
a  penalty  of  one-quarter  of  one  per  cent,  for  failure  to  deliver  ^he^Ban^  o7  of 
at  2:15  p.  m.  In  December,  1864,  the  Bank  of  New  York  New  York, 
opened  gold  accounts.  Any  one  wdio  paid  a  bonus  of  $1,000 
for  the  privilege  might  deposit  gold  with  the  bank  and  draw  against  it  by 

1  Men  and  Mysteries  of  Wall  Street:  James  K.  Medbery.  Boston.  1871. 


154 


THE  NEW  YORK  STOCK  EXCHANGE 


means  of  a  special  check,  across  the  face  of  which  the  word  “Gold”  was 
emblazoned  in  bronze  letters  of  old  English  type.  These  checks,  when 
bearing  the  signature  of  the  drawer  and  the  certifications  of  the  bank 
officers,  were  good  deliveries  in  the  Gold  Exchange,  and  were  also  available 
as  collateral  for  loans.  The  spectacle  of  messengers  laden  with  sacks  of  the 
yellow  metal  disappeared  once  and  for  all. 

In  March,  1865,  Congress  taxed  all  sales  of  gold  one-tenth  of  one  per 
cent.,  afterward  reducing  the  tax  to  one-hundredth  of  one  per  cent.  Rev¬ 
enue  stamps,  pasted  on  the  sales  tickets,  were  the  means  of  payment.  Deal¬ 
ing  in  the  metal  was  now  at  its  height,  and  ten  per  cent,  fluctuations  in  a 
single  day  caused  no  amazement.  An  indicator  which  showed  the  public 
each  price  at  which  a  new  transaction  was  made  had  looked  out  on  William 
Street,  when  Gilpin’s  news  room  was  the  theatre  of  action,  and,  when  the 
change  to  the  room  at  William  and  Beaver  streets  was  made,  this  useful 
institution  was  retained.  It  was  the  practice  of  a  crowd  of  hangers-on  in  the 
street  to  bet  on  the  prospective  gyrations  of  the  indicator. 
One  of  these  was  accustomed  to  hold  an  occasional  cock  fight 
in  his  office  after  the  hours  of  trading  were  over  for  the  day, 
and,  by  dint  of  a  little  shrewd  gambling  on  the  birds,  could 
recoup  himself  for  losses  incurred  in  vain  attempts  to  prog¬ 
nosticate  the  values  of  greenbacks.  The  Gold  Exchange  took  a  lease  of  the 
premises  at  Nos.  12,  14,  and  16  New  Street,  with  an  approach  through 
No.  14  Broad  Street,  on  May  1,  1865,  but  did  not  occupy  the  place  until 
August,  as  alterations  of  an  extensive  sort  were  necessary  to  make  it 
suitable.  The  rental  was  fixed  at  $25,000  a  year  for  the  first  five  years. 
For  the  second  five  years  it  was  to  be  $16,000  annually,  the  Gold  Exchange 
apparently  believing  that  speculation  in  the  metal  was  likely  either  to 
cease  between  1870  and  1875 — in  which  case  the  members  would  have  to 
sublet  their  quarters — or  so  to  dwindle,  at  any  rate,  as  to  make  it  imprac¬ 
ticable  to  pay  as  large  a  sum  as  they  could  afford  to  pay  in  1865. 


Betting  on  the 
indicator  and 
betting  on  the 
birds. 


XI 

PHASES  OF  WAR-TIME  SPECULATION 

F  the  commercial  and  financial  history  of  the  country  during 
the  period  of  the  Civil  War  teaches  anything,  it  teaches  the 
inevitable  and  extravagant  tendency  to  speculation  which  is 
bred  by  an  unnatural  state  of  trade.  Such  a  calamity  as  the 
success  of  the  greenback  party,  or  the  carrying  into  effect  of 
free  silver  theories,  would  no  doubt  give  rise  to  another  era 
like  that  of  the  sixties.  Any  change  which  transformed  everyday  business 
into  a  game  of  chance,  either  by  annihilating  the  stable  character  of  money, 
or  by  some  other  means,  would  of  course  make  gamesters  out  of  the  com¬ 
munity  at  large.  The  issue  of  legal  tenders,  and  the  extraordinary 
consumption  of  wealth  caused  by  the  war,  united  to  bring  about  such  a 
result.  The  evanescent  theatres  of  speculation  which  arose  will  repay  our 
close  scrutiny,  not  only  because  they  interest  the  lover  of  the  picturesque  in 
history,  but  because  they  show  the  fruits  of  faulty  economic  measures. 

The  gold  market  has  already  been  discussed,  but  its  importance  will 
demand  a  frequent  return  to  it.  About  half  of  the  brokers  on  the  Gold 
Exchange  (which  included,  in  October,  1866,  437  active  and  117  associate 
members)  belonged  to  the  Stock  Exchange  also.  Another 
influential  organization,  many  of  whose  members  were  repre-  gtP0eLnk  Broktrf 
sented  in  the  gold  mart,  was  the  Open  Board  of  Stock  Brokers, 
a  union  of  the  responsible  dealers  who  had  not  obtained  admittance  to  the 
Regular  Board,  as  the  Stock  Exchange  was  called.  The  two  bodies  were 
merged  in  1869. 

The  Open  Board  came  into  being  before  the  Stock  Exchange  had 
adopted  a  continuous  market.  The  strenuous  dealers  on  the  curb,  to 
whose  hands  the  Exchange  committed  orders  for  execution  between  the 
calls,  formed  its  nucleus.  From  the  open  street  they  went  to  the  Coal  Hole. 
Their  business  grew  astoundingly.  In  1863  they  removed  again,  this  time 


156 


THE  NEW  YORK  STOCK  EXCHANGE 


to  the  northeast  corner  of  William  and  Beaver  streets  (the  present  home  of 
the  Farmers’  Loan  and  Trust  Company),  which  was  subsequently  occupied 
for  a  time  by  the  gold  brokers.  Irresponsible  men  mingled  in  the  crowd  of 
dealers  here,  and  contracts  undertaken  with  them  frequently  resulted  in 
losses.  A  number  of  men  united  on  December  21,  1863,  to  wipe  out  this 
and  other  defects  by  the  creation  of  a  new  organization,  and  subscribed  to 
the  following  agreement : 

“We,  the  undersigned,  hereby  associate  ourselves  together  for  the 
formation  of  a  Public  Stock  Exchange  in  the  city  of  New  York,  with  the 
understanding  that  as  soon  as  fifty  subscribers  shall  have  attached  their 
names  hereto,  a  meeting  shall  be  called  to  take  measures  to  complete  the 
organization  upon  a  basis  which  shall  meet  the  wants  of  the  community.” 

Fifty  subscribers  were  soon  secured.  Early  in  the  following  year  meet¬ 
ings  were  held  to  carry  out  the  provisions  of  this  agreement.  On  March 
16,  1864,  a  constitution  was  adopted,  the  new  body  taking  the  name, 
“Open  Board  of  Stock  Brokers.”  It  provided  for  the  admission  of  the 
public  to  the  Board  Room,  something  which  the  Stock 
mated  for  the"  Exchange  had  never  seen  fit  to  allow,  and  established  an 
first  time  to  see  Executive  Committee  to  supervise  the  interests  of  the  organi¬ 
se  speculative  zation.  In  this  month  the  Open  Board  took  a  lease  of  Nos. 

16  and  18  Broad  Street.  While  these  premises  were  being 
altered  for  its  occupancy,  the  new  organization  used  an  upper  room  at 
No.  11  Broad  Street,  beginning  business  on  May  2d.  The  first  officers 
were:  Samuel  B.  Hard,  president;  S.  S.  Joseph,  first  vice-president;  H.  A. 
Tucker,  second  vice-president;  W.  M.  Parks,  treasurer;  W.  T.  Hooker, 
secretary ;  B.  F.  Gallagher,  assistant  secretary ;  W.  B.  Bishop,  roll-keeper. 
Mr.  Hard  was  chairman  of  the  Arbitration  Committee.  The  new  Board 
room  at  Nos.  16  and  18  Broad  Street  adjoined  on  the  south  the  entrance 
to  the  quarters  of  which  the  Gold  Exchange  obtained  possession  in  the 
following  year.  The  Open  Board  fixed  its  initiation  fee  at  $500.  This  was 
eventually  raised  to  $2,000 ;  but  in  November,  1868,  when  the  memberships 
became  salable,  it  was  put  back  again  to  $500.  The  members  were  seated 
during  the  calls,  which  were  held  at  1  o’clock  and  at  3:15  in  the  afternoon, 
a  10  o’clock  morning  call  being  added  some  time  later.  Between  these 
periods  the  Board  held  a  continuous  market  on  the  street,  which  gave 
way,  in  December,  1865,  to  the  “Long  Room”  of  the  Stock  Exchange’s 
new  building. 

The  removal  of  the  New  York  Stock  Exchange  from  Lord’s  Court  to 
the  structure  which  was  its  home  until  demolished,  in  1901,  to  make  room 
for  the  present  edifice,  took  place  on  December  9,  1865.  The  New  York 
Stock  Exchange  Building  Company — with  stock  subscribed  by  members  of 


PHASES  OF  WAR-TIME  SPECULATION 


157 


the  Board  only — had  erected  this  structure  at  Nos.  10  and  12  Broad  Street, 
running  through  to  New  Street,  and  had  leased  to  the  Stock  Migration  of  the 
Exchange  a  room  on  the  second  floor,  seventy-five  feet  long  on  stock  Exchange 
New  Street,  and  fifty-three  feet  wide.  On  this  occasion  the  to  Broad  street- 
Exchange  first  yielded  to  the  new  tendency  so  far  as  to  admit  the  public  to 


Nos.  16  and  18  Broad  Street. 


NEW  YORK  STOCK  EXCHANGE,  NOS.  10  AND  12  BROAD  STREET.  1866. 

OPEN  BOARD  OF  STOCK  BROKERS,  ON  THE  EXTREME  LEFT,  NOS.  16  AND  18  BROAD  STREET. 


158 


THE  NEW  YORK  STOCK  EXCHANGE 


its  Board  room.  It  did  not  provide,  however,  for  a  continuous  market. 
George  W.  McLean  and  others  combined  to  make  up  for  the  defect.  They 
leased,  for  three  years,  from  the  Building  Company,  the  ground  floor — 
known  thereafter  as  the  “Long  Room”  —  and  charged  an  annual  subscrip¬ 
tion  for  the  privilege  of  trading  in  it.  This  room  was  forty-five  feet  wide 
and  about  one  hundred  and  forty-five  feet  long,  running  clear  through  from 
Broad  to  New  Street.  Telegraph  offices  were  installed  nearthe  Broad  Street 
end.  Members  of  the  Stock  Exchange,  of  the  Open  Board,  and  of  the  unor¬ 
ganized  fraternity  of  nondescript  brokers  met  in  speculative  strife  within 
the  confines  of  the  “Long  Room.”  Here  the  vast  business  of 
The  “Long  trading  in  securities  was  done,  for  the  sales  at  the  calls  were 
Government  Bond  sma^  *n  comparison.  In  1867  the  Exchange  established  a 
Department.  Government  Bond  Department,  assigning  it  a  room  in  the 
northerly  end  of  the  New  Street  front.  Any  approved  person 
could  obtain  admission  to  it  by  paying  $100  a  year.  The  subscribers 
became  permanent  members  in  June,  1868,  an  initiation  fee  of  $500  being 
adopted.  Six  months  later  this  was  raised  to  $1,000.  Meanwhile  this  New 
Street  room  had  been  exchanged  with  another  young  organization,  the 
Mining  Exchange,  for  what  became  known  as  the  “  Bond  Room.” 


HE  Mining  Exchange  was  the  crystallization  of  another  speculative 
movement  which  requires  attention  before  we  examine  the  evening 
markets  or  return  to  the  excitement  of  the  Gold  Room.  Some 
reference  has  been  made  to  the  ephemeral  organizations  formed  in  the  late 
fifties  to  deal  in  mining  shares.  On  March  21,  1864,  forty-one  brokers  met 
in  the  office  of  J.  B.  Norris  and  organized  the  Mining  Board  of  New  York. 
John  Simpkins  was  its  president.  Almost  all  of  the  subscribers  wrere  Stock 
Exchange  members.  An  initiation  fee  of  $250  was  established,  and  the 
Mining  Board  took  up  its  abode  in  Gilpin’s  news  room,  at  the 
Revival  of  the  southeast  corner  of  William  Street  and  Exchange  Place,  after 
market.Share  the  Gold  Room  vacated  the  premises  on  October  1,  1864. 

Thence  it  travelled  to  No.  12  Wall  Street,  and  later  to  a 
cheap  and  dingy  room  at  No.  7  New  Street.  Here  the  magic  process  of 
working  up  the  shares  of  unknown  mining  companies — the  chief  assets  of 
which  were  credit  at  a  job  printer’s  and  faith  in  American  prosperity — 
gratified  the  eyes  and  in  time  appropriated  the  cash  of  the  beholder. 
“Minnesota,”  “Evergreen  Bluff,”  “Quincy,”  and  “Central” — these  are  the 
names  by  which  some  veterans  of  Wall  Street  conjure  up  the  memories  of 
attractive  and  now  exploded  bubbles  that  were  believed  to  represent  real 
value  forty  years  ago. 

Meanwhile  Drake’s  discovery  of  petroleum  in  western  Pennsylvania 
had  borne  golden  fruit.  The  age  of  Coal  Oil  Johnny  had  begun.  An 


PHASES  OF  WAR-TIME  SPECULATION 


159 


immense  class  of  illiterate  men,  suddenly  entrusted  with  a  wealth  which 
dazzled  them  by  its  newness,  were  amusing  and  startling  civilization  in 
their  efforts  to  get  rid  of  it.  They  descended  upon  New  York, 
not  like  the  locusts  which  plagued  the  Egyptians,  but  like  a  The  bad  example 
swarm  of  gaudy  butterflies,  each  released  from  the  chrysalis  riJTqukkiy. 
by  the  touch  of  oil.  The  “one-gallus”  man  who  had  been 
wont  to  drive  his  knife  into  the  general  pat  of  butter,  and  to  harpoon  a 
desired  slice  of  bread  with  his  fork,  now  dipped  his  hands  into  the  scented 
finger-bowls  of  the  fashionable  restaurant,  while  glancing  sheepishly  at  the 
neighboring  diners  from  the  corner  of  his  eye.  He  endeavored  to  substitute 
French  wines  for  the  red  liquor  that  was  the  solace  of  humbler  days,  and 
the  haberdasher,  the  jeweller,  and  the  perfumer  received  visible  evidence  of 
his  wealth.  The  public  likewise  received  it  and  fell  to  speculating  in  the 
shares  of  petroleum  companies,  in  the  expectation  of  finding  like  fortune. 
An  immediate  result  was  the  formation  of  the  Petroleum  Board,  which  held 
its  first  meeting  on  October  3, 1864,  at  Nos.  16  and  18  Broad  Street,  the 
headquarters  of  the  Open  Board  of  Brokers. 

Samuel  B.  Hard,  the  first  president  of  the  Open  Board  of  Brokers,  was 
elected  president  of  this  organization,  and  Edmund  C.  Stedman,  secretary. 
An  initiation  fee  of  $250  was  adopted,  and  members  of  the  Stock  Exchange 
proved  eager  to  pay  it.  The  trading  started  with  the  call  of 
eleven  stocks:  Germania,  Titus,  Manhattan,  Rynd  Farm,  Petr°ieum  Board 

77  7  7  launched  in 

Delameter,  Rock  Oil,  and  others,  but  this  number  grew  to  business, 
about  thirty-five.  The  stocks  kept  pushing  upward,  and  tales 
of  great  profits  served  to  augment  the  crowd  that  dealt  in  petroleum. 
These  shares,  like  other  shares,  could  move  down  as  well  as  up,  a  fact  which 
will  become  apparent  by  a  glance  at  the  following  table  of  prices : 


Companies. 
Bennehoff  Run, 
United  States, 
Pithole,  . 
Central,  . 
Rynd  Valley,  . 


Bids,  1865. 

Bids,  1869.1 

$21.00 

$0.40 

40.00 

.80 

18.00 

1.50 

100.00 

.75 

8.00 

.35 

On  January  1, 1866,  the  brokers  in  mining  and  oil  stocks  united,  forming 
the  Petroleum  and  Mining  Board.  The  room  in  the  new  Stock 
Exchange  Building,  which  later  became  the  “Bond  Room,”  on  and  Mining 
was  leased.  Many  new  members  were  brought  in  and  the  {o^Jra  ]om 
initiation  fee  was  raised  to  $1,000.  In  no  other  theatre  of 
speculation  did  promoters  reap  more  success  with  the  airy  products  of  their 
fancy.  The  public  bore  enthusiastic  testimony  to  the  truth  of  the  maxim 
that  it  delights  to  be  humbugged.  Corners  in  worthless  shares  were  easily 

‘Men  and  Mysteries  of  Wall  Street:  James  K.  Medbery.  Boston.  1871. 


160 


THE  NEW  YORK  STOCK  EXCHANGE 


arranged.  Some  operators  were  induced  at  one  time  to  sell  the  stock  of  the 
Napoleon  Oil  Company  short.  The  promoters  of  the  concern  then  forced 
the  price  from  $2  to  $32  a  share.  Bankruptcy  stared  many  an  unfortunate 
broker  in  the  face.  Appeal  was  taken  to  the  courts,  and  it  was  discovered 
that  the  property  of  this  company,  which  claimed  to  own  much  valuable 
land  in  Kentucky,  actually  consisted  of  a  number  of  choice  samples  of 
petroleum  in  glass  jars,  the  lease  of  an  office,  and  a  moderate  amount  of 
capital  invested  in  pens,  paper,  and  ink.  Another  striking  collapse  was 
that  of  the  four  companies  floated  by  George  A.  Freeman,  John  J.  Osborn, 
and  William  H.  Forbes.  These  were  the  New  York  &  Nevada  Gold  and 
Silver  Mill  and  Mining  Company,  the  New  York  &  Washoe  Mining  Company, 
the  New  York  &  Reese  River  Company,  and  the  New  York  &  Sante  Fe 
Methods  Mining  Company  of  Nevada.  The  first  three  had  an  aggregate 

of  a  knot  of  capitalization  of  $3,160,000,  and  the  fourth  had  a  paid-up 
enterprising  capital  of  $700,000.  These  concerns  enjoyed  a  flourishing 
promoters.  market  career  until  some  unfortunate  litigation  disclosed  the 
fact  that  the  promoters  had  used  the  cash  capital  of  the  New  York  &  Santa 
Fe  company,  to  the  amount  of  $512,000,  with  which  to  pay  the  dividends 
on  the  stock  of  its  yoke  fellows. 

Such  eccentric  methods  quickly  tended  to  discourage  speculation  in 
oil  and  mining  shares.  Half  of  the  brokers  had  quit  the  organization  by 
the  summer  of  1867.  The  Petroleum  and  Mining  Board  removed  to 
cheaper  quarters  in  New  Street,  and  thence  to  No.  37  Broad  Street — where 
its  sessions  were  held  for  some  years. 


n 


0  phenomenon  of  war  times  was  a  more  pointed  illustration  of  the 
speculative  frenzy  that  had  taken  hold  of  the  minds  of  men  than 
the  evening  market  for  gold  and  securities.  It  was  the  practice  in 
those  days  for  a  broker  to  ride  downtown  in  a  stage  directly  after  an  early 
breakfast — scanning  market  reports  in  the  newspapers  on  the  way — then 
trade  until  the  hour  for  luncheon,  when  he  would  hurry  out 
A  br,oke,f 8  dj“ly  for  an  indigestible  mouthful,  return  to  keep  at  his  heart- 
sixties.  breaking  pursuit  till  nearly  6  o  clock,  ride  uptown  to  dinner, 

discussing  stocks  on  the  way,  finish  his  evening  meal  with 
unwise  haste,  and  then  set  out  for  the  nightly  market,  where  he  would  con¬ 
tinue  to  trade  till  past  the  hour  at  which  he  should  be  in  bed.  The  next 
morning  saw  the  frightful  treadmill  in  motion  again.  In  1862  the  brokers 
were  accustomed  to  meet  in  the  halls  and  reading  room  of  the  Fifth  Avenue 
Hotel.  Naturally  the  proprietors  disliked  the  noise  and  confusion  this 
gathering  caused,  but  they  held  their  peace  for  a  time,  evidently  hoping 
that  they  would  be  more  than  compensated  for  the  trouble  by  an  increased 


PHASES  OF  WAR-TIME  SPECULATION 


161 


traffic  in  liquor  and  cigars.  One  of  the  operators  leased  quarters  at  the 
northwest  corner  of  Fifth  Avenue  and  Twenty-third  Street  for  a  time,  that 
portion  of  the  Fifth  Avenue  Hotel  building  now  occupied  by 
the  Second  National  Bank ;  but  this  place  was  not  very  popu-  Nisht  trading 
lar,  and  the  market  returned  to  the  hall  and  reading  rooms  Avenue  Hotel, 
of  the  hotel  in  January,  1863.  The  trading  grew  in  volume. 

Stock  sold  frequently  to  the  extent  of  ten  thousand  shares  at  a  time,  and 
the  gold  dealing  was  proportionately  large.  The  hotel  proprietors  con¬ 
cluded  that  they  could  stand  it  no  longer,  and  posted  a  notice  which  put 
an  end  to  the  nuisance. 

The  basement  under  the  previously  occupied  corner  of  Fifth  Avenue 
and  Twenty-third  Street  was  now  secured,  and  here  the  evening  market 
flourished  until  March,  1864,  when  R.  H.  Gallagher  obtained  a  lease  of  the 
Republican  headquarters,  at  the  southeast  corner  of  Broadway  and 
Twenty-third  Street,  and  the  brokers  took  up  their  abode  in  this  place. 
Mr.  Gallagher’s  venture  was  a  financial  success.  There  were  several  minor 
evening  exchanges,  but  his  overshadowed  them  all.  He  decided  to  make 
his  institution  permanent,  and  accordingly  leased  the  plot  on  the  south  side 
of  Twenty-fourth  Street,  west  of  Broadway,  now  occupied  by  the  Madison 
Square  Theatre,  and  erected  upon  it  a  two-story  building  with  a  marble 
front.  It  measured  forty-five  feet  on  the  street  and  was  ninety-six  feet  deep. 

On  Palm  Sunday,  April  9,  1865,  the  great  civil  struggle  was  virtually 
settled  by  the  surrender  of  Lee  to  Grant  at  Appomattox  Court  House. 
The  market  had  been  buoyant  previously.  It  was  now  exultant.  In  the 
face  of  a  drop  in  gold  of  about  four  per  cent.,  bringing  the  price  down  to 
14514,  which  was  a  thoroughly  reasonable  movement,  railway 
stocks  rose  two  to  three  per  cent.  On  the  day  following  Lee’s  GaUagher’l  Eve- 
surrender  trading  began  in  Gallagher’s  new  building  in  ning  Exchange 
Twenty-fourth  Street.  The  proprietor  noted  complacently  street 
that  subscriptions  had  been  entered  for  almost  all  of  his  two 
hundred  and  seventy-six  seats,  for  each  of  which  he  charged  $250  a  year. 
He  little  surmised  that  the  institution  was  to  flourish  only  four  months 
and  a  half. 

Good  Friday,  April  14th,  was  a  stock  and  gold  holiday  in  this  city.  At 
9:30  o’clock  that  evening  the  fanatical  Wilkes  Booth  horrified  the  civilized 
world  and  plunged  a  nation  into  grief  by  shooting  President  Lincoln  at 
Ford’s  Theatre  in  "Washington,  whither  the  Executive  had  gone  with  his 
wife  and  some  friends  to  see  the  play,  “Our  American  Cousin.”  The  same 
day  an  assassin  entered  the  sick  chamber  of  Secretary  Seward,  of  the  War 
Department,  and  made  a  fruitless  effort  to  kill  him  by  stabbing  him  in  the 
throat  and  face,  while  Frederick  Seward,  the  Secretary’s  son,  received  a 
fracture  of  the  skull  in  the  endeavor  to  protect  his  father.  Abraham 


162 


THE  NEW  YORK  STOCK  EXCHANGE 


Brief  lull  in 
speculation. 


Lincoln  died  at  7:22  o’clock  on  the  following  morning,  Saturday.  On  that 
day  the  Stock  Exchange  and  the  Gold  Room  held  broken  sessions.  A 
number  of  hungry  speculators,  little  impressed  by  their  countrymen’s  loss, 
or  by  the  pathos  of  Lincoln’s  death  at  the  moment  when 
Lincoln  dies  victory  had  crowned  four  years  of  toil  and  anxiety  and  set  its 

at  the  hand  J  ^ 

of  an  assassin,  seal  upon  the  mouths  of  malcontents,  could  not  overlook  a 
chance  to  make  money,  and  bought  gold  freely  that  Saturday 
morning.  They  expected  that  the  assassination  would  injure  the  national 
credit.  They  paid  between  153  and  160  for  the  metal.  Gold  opened  on 
Monday,  April  17th,  at  153,  and  ran  down  to  148.  A  newspaper  editor  at 
the  time  calculated  that  the  shrewTd  gamesters  who  hoped  to  profit  by  the 
killing  of  the  President  had  sustained  an  average  loss  of  about  ten  points, 
just  enough  to  wipe  out  an  average  margin. 

The  Evening  Exchange,  as  well  as  the  daytime  exchanges,  enjoyed  but 
a  moderate  speculative  activity  during  the  days  immediately  succeeding  the 
national  calamity.  But  when  Lincoln’s  work  and  worriment  had  yielded 
to  a  quiet  bed  in  the  grave,  and  the  dazed  country  had  begun 
to  piece  together  the  fragments  of  his  utterances  and  to 
realize  its  loss — when  the  lips  of  the  defamer,  the  critic  and  the 
time-serving  politician  had  learned  to  fashion  themselves  to  the  universal 
words  of  praise  for  the  dead,  and  to  join  in  the  recognition  which  came  too 
late  to  be  heard  by  the  man  who  had  earned  it,  the  speculative  market 
again  proceeded  to  take  its  accustomed  course.  The  revelry  of  the  Evening 
Exchange  once  more  gave  vent  to  the  public  spirit. 

Much  curiosity  has  been  expressed  from  time  to  time  as  to  the  volume 
of  business  in  stocks  and  gold  at  this  period.  The  population  of  the  country 
was  not  more  than  about  35,000,000,  considerably  less  than  half  of  what 
it  is  to-day,  and  certainly  there  were  only  about  20,000,000  persons  from 
wThom  New  York,  as  a  speculative  centre,  could  draw,  as  against  some 
80,000,000  now.  Yet  in  the  year  ending  June  30, 1865,  the  brokers  of  this 
city  transacted  an  annual  business  in  stocks  and  gold  amounting  to  $6,000,- 
000,000;  in  other  words,  $20,000,000  a  day,  counting  three  hundred  work¬ 
ing  days  to  the  year.  A  dollar  changed  hands  every  day 
mustratehat  *n  ^ie  sPeculative  market  in  this  city  for  every  white  man, 

activity.  woman,  and  child  in  the  loyal  population  of  this  country. 

These  figures  are  obtained  from  the  returns  to  the  Internal 
Revenue  Department,  there  being  at  the  time  a  tax  of  one-tenth  of  one  per 
cent,  on  gold  sales  and  one-twentieth  of  one  per  cent,  on  stock  sales.  In 
the  list  quoted,  Hallgarten  &  Herzfeldt  stood  first,  with  a  yearly  business 
of  $169,232,939;  Gentil  &  Phipps  were  next,  with  $160,901,851,  and 
E.  Morrison  &  Co.  third,  with  a  business  of  $153,163,670.  All  threeof  these 
firms  appear  to  have  been  connected  with  the  Open  Board  of  Brokers. 


PHASES  OF  WAR-TIME  SPECULATION 


163 


William  H.  Miller  was  at  the  foot  of  the  list,  having  been  in  business  for  one 
month  and  made  sales  to  the  amount  of  $200. 

These  figures  are  of  use  in  understanding  the  rage  for  speculation  that 
brought  a  temporary  prosperity  to  the  Evening  Exchange.  It  attracted  a 
dense  crowd  each  night.  The  curiosity  seeker  might  enter  beneath  the 
sculptured  heads  of  bulls  and  bears,  which  adorned  its  marble  portals,  by 
paying  an  admission  fee  of  25  cents.  He  need  climb  but  one  flight  of 
stairs  to  reach  what  was  known  as  the  “Gold  Room,”  though  it  con¬ 
tained  both  gold  and  stock  markets — a  large  hall  surrounded  by  high, 
arched  windows,  kept  open  during  the  hot  weather,  and  with  a  rose  window 
at  the  back.  A  newspaper  writer  of  the  time,  after  a  visit  to  this  chamber, 
thus  described  it:  “A  row  of  arm-chairs  runs  along  the  wall,  providing 
seats  for  the  irregular  attendants,  while  a  balustrade  divides  the  room  and 
sets  apart  a  number  of  fauteuils  for  which  members  of  the  Exchange  pay 
the  moderate  rent  of  $250  per  annum,  this  stipend  giving  the 
business  man  the  privilege  of  gambling  by  night  as  he  had  An  inside  view 
already  gambled  by  day.  Beyond  the  balustrade  stands  the  ExcbangeemUS 
mob  —  if  there  can  be  any  distinction  between  the  classes  of 
society  that  attend  the  operation  of  their  betters,  from  a  pecuniary  point 
of  view,  with  considerable  anxiety  and  unfeigned  jealousy.  In  the  midst 
of  the  reserved  seats  is  placed  the  tribune  from  which  the  names  of  the 
stocks  on  speculation  are  being  called,  while  the  brokers  are  responsive 
from  below.” 

The  doors  of  the  Evening  Exchange  were  thrown  open  at  8:30  o’clock 
each  night,  and  fifteen  minutes  of  confusion  usually  elapsed  before  the 
actual  trading  began.  It  went  at  a  rapid  pace  when  once  started.  “The 
frantic  speculators,”  says  the  eye-witness  already  quoted,  “rushing  from 
their  seats,  crowd  down  the  aisle,  and  the  wave  surges  against  the  tribune ; 
the  madness  is  universal.”  It  was  no  uncommon  thing  to  see  one  broker 
seize  another  by  the  arm  or  shoulder  and  shake  him  furiously,  either  in 
remonstrance  or  in  an  effort  to  get  his  attention.  The  rushing  together  of 
contending  bodies,  the  uplifting  of  waving  arms  and  hungry,  oscillating 
fingers,  the  mingling  of  a  multitude  of  eager  voices  which  agitated  every 
note  in  the  gamut  of  human  expression,  the  symbols  of  avarice,  anger, 
pain,  joy,  hope,  fear,  cunning,  exhaustion,  and  stupefaction  upon  scores  of 
distorted  faces,  all  these  bore  testimony  to  the  energy  of  the  market.  One 
section  of  the  room  was  set  apart  for  the  gold  dealers,  who  met  beneath  a 
gallery  to  which  was  attached  a  black  frame  for  the  display  of  price  fluc¬ 
tuations.  These  brokers  gathered  around  a  circular  balustrade,  which 
answered  the  purpose  of  a  pit  and  enabled  them  to  hurl  bids  and  offers 
across  the  enclosure  without  the  danger  of  bodily  contact.  At  10  o’clock  in 
the  evening  stock  and  gold  markets  ended,  and  the  weary  speculators 


164 


THE  NEW  YORK  STOCK  EXCHANGE 


sallied  from  the  building,  their  nerves  quivering  and  their  brains  teeming 
with  the  excitement  of  the  night. 

The  Evening  Exchange  came  to  an  end  shortly  after  the  Mumford 
failure  and  the  discovery  of  the  Ketchum  forgeries,  which  were  forcible  illus¬ 
trations  of  the  fruits  of  excessive  speculation.  Peter  R.  Mumford,  who  was 
a  gold  operator  and  a  respected  trustee  of  the  Protestant  Episcopal  Church 
at  Flushing,  Long  Island,  failed  on  August  12,  1865,  and  was  shortly 
afterward  arrested  for  drawing  a  worthless  check  for  $28,200  on  the 
Mechanics’  Bank.  The  moral  sense  of  the  community  was 
forgeriesChUm  considerably  shocked.  On  August  14th  the  prominent  Stock 
Exchange  house  of  Ketchum,  Son  &  Co.  suspended  payment, 
and  Charles  Graham,  head  of  the  firm  of  Graham  &  Co.,  who  had  been 
acting  as  broker  for  Edward  B.  Ketchum,  also  went  under.  Edward  B. 
Ketchum,  a  junior  member  of  Ketchum,  Son  &  Co.,  was  a  young  man  wTho 
had  been  indulging  in  tremendous  speculation  on  his  own  account.  The 
game  had  gone  against  him,  and  he  betook  himself  to  crime.  On  the  day 
of  his  firm’s  collapse  the  newrs  was  bruited  about  that  he  had  disappeared 
with  a  hand-satchel  full  of  greenbacks  and  securities.  Concomitantly  the 
Street  learned  that  it  had  absorbed  forged  gold  checks  of  the  Bank  of  New 
York,  purporting  to  be  signed  by  Lockwood  &  Co.,  Yermilye  &  Co.,  Einstein, 
Rosenfeldt  &  Co.,  Brockelmann,  Unger  &  Co.,  and  others,  to  amounts 
running  into  the  millions.  A  serious  defalcation,  of  which  the  Phenix  Bank 
was  the  victim,  had  been  discovered  a  short  while  previous,  and  the  receiv¬ 
ing  teller  of  the  bank,  Henry  B.  Jenkins,  having  wasted  the  substance  of 
the  institution  in  riotous  living,  wras  already  under  arrest.  Underneath 
these  successive  shocks  the  market  gave  way.  A  decline  in  the  leading 
stocks  of  from  2%  to  9%  points  took  place  between  Monday,  August  14th, 
and  the  following  Wednesday.  Many  of  the  speculators  had  been  attracted 
to  Saratoga  by  the  races,  and,  advised  that  they  were  losing  money  in  this 
city  even  more  rapidly  than  they  could  spend  it  there,  deserted,  in  a  panic, 
the  scenes  of  gayety  and  hastened  to  New  York.  Daniel  Drew,  who  had 
been  caught  with  a  heavy  line  of  stocks  at  the  time,  started  a  bull  move¬ 
ment  in  order  to  make  up  his  losses.  He  succeeded  in  lifting  Erie  from  7 6% 
on  Wednesday  to  82  on  the  following  day,  and  to  8714  on  August  28th ;  but 
the  evidence  is  incomplete  as  to  whether  or  not  he  came  out  even. 

Morris  Ketchum,  head  of  the  ruined  firm,  made  an  individual  assign¬ 
ment.  On  August  19th  the  Stock  Exchange  expelled  his  son  Edward,  this 
being  the  third  time  in  the  Board’s  history  when  it  had  taken 

Ed  wxrd  13  ' — ^ 

Ketehum  expelled  suc^  action.  The  defaulter  was  captured  in  this  city  six  days 
by  the  stock  Ex-  later,  and  a  pathetic  scene  was  enacted  when  his  old  father, 
change  and  forgpv-  ^vp°  had  for  years  held  his  head  high  among  his  neighbors, 
visited  the  young  man  m  prison  and  exclaimed,  “My  son, 
my  son,  you  have  ruined  me,  but  I  forgive  you.” 


PHASES  OF  WAR-TIME  SPECULATION 


165 


It  became  known,  eventually,  that  the  liabilities  of  Ketchum,  Son  &  Co. 
amounted  to  $4,000,000,  the  sum  of  $2,750,000  having  been  stolen  out¬ 
right  by  young  Ketchum.  Graham  &  Co.  had  failed  for  $1,350,000,  leaving 
quite  out  of  account  an  additional  liability  of  $1,350,000  due  to  the 
paying  out  of  gold  checks  which  young  Ketchum  had  forged. 

The  Stock  Exchange  on  August  23d,  and  the  Open  Board  of  Brokers  on 
the  following  day,  passed  resolutions  forbidding  members  to  deal  at  the 
Evening  Exchange,  under  penalty  of  expulsion.  This  action, 
which  put  an  end  to  the  last-named  institution,  was  applauded  ^Tuvening  °f 
by  the  best  part  of  the  community.  A  further  result  of  the  Exchange. 
Ketchum  forgeries  was  witnessed  in  the  following  November. 

The  United  States  Treasury  then  began  the  issue  of  gold  certificates.  These 
were  made  a  good  delivery  by  the  Gold  Exchange,  and  took  the  place  of  the 
gold  checks  of  the  Bank  of  New  York. 


HE  Gold  Room  was  by  all  odds  the  most  important  of  the  fleeting 
1  m  speculative  centres  which  entered  into  the  history  of  the  Civil  War 
period.  Its  fluctuations  had  to  be  considered  in  every  operation 
undertaken  in  any  other  market,  whether  that  were  a  market  for  wool, 
hides,  wheat,  or  mining  shares,  and  its  influence  will  be  found  a  recurring 
factor  in  the  story  of  temporary  stock  exploits.  For  an  idea  of  its  pictur¬ 
esque  side,  it  will  be  well  to  call  again  upon  an  eye-witness  of  its  activities. 

Horace  White,  who  visited  the  Gold  Room  in  1866,  wrote,  and  later 
embodied  in  his  “Money  and  Banking,”  a  graphic  description  of  it,  a  part 
of  which  follows : 


“Imagine  a  rat-pit  in  full  blast,  with  twenty  or  thirty  men  ranged 
around  the  rat  tragedy,  each  with  a  canine  under  his  arm,  yelling  and 
howling  at  once,  and  you  have  as  good  a  comparison  as  can  be  found  in 
the  outside  world  of  the  aspect  of  the  Gold  Room  as  it  strikes  the  beholder 
on  his  first  entrance.  The  furniture  of  the  room  is  extremely  simple.  It 
consists  of  two  iron  railings  and  an  indicator.  The  first 
railing  is  a  circle  about  four  feet  high  and  ten  feet  in  diameter,  The  New  street 
placed  exactly  in  the  centre  of  the  room.  In  the  interior,  Gold  Room 
which  represents  the  space  devoted  to  rat  killing  in  other  eye-witness7 
establishments,  is  a  marble  cupid  throwing  up  a  jet  of  pure 
croton  water.  The  artistic  conception  is  not  appropriate.  Instead  of  a 
cupid  throwing  a  pearly  fountain  into  the  air,  there  should  have  been  a 
hungry  Midas  turning  everything  to  gold  and  starving  from  sheer  inability 
to  eat. 

“The  other  railing  is  a  semicircle  twenty  or  thirty  feet  from  the  central 
one.  The  outer  rail  fences  off  the  ‘lame  ducks ’  and  ‘  dead  beats,’  men  who 
have  once  been  famous  at  the  rat-pit,  but  have  since  been  cleaned  out. 
Solvency  is  the  first  essential  of  the  Gold  Room.  Nothing  bogus  is  allowed 


166 


THE  NEW  YORK  STOCK  EXCHANGE 


to  interfere  with  the  serious  nature  of  the  business  in  hand.  Nevertheless, 
these  ‘  lame  ducks  ’  and  ‘  dead  beats  ’  cannot  keep  away  from  the  place.  Day 
after  day  they  come  and  range  themselves  along  this  iron  grating  and  look 
over  at  the  rat-pit  with  the  strongest  expression  of  intelligent  vacancy  and 
longing  despair  that  can  be  found  out  of  purgatory.  They  seem  to  be  a 
part  of  the  furniture  of  the  room.  While  I  was  there  I  did  not  see  one  of 
them  move  or  speak,  and  when  they  winked  it  was  with  much  the  same 
spirit  that  an  owl  at  mid-day  lowers  the  film  over  his  eye  and  lifts  it 
again. 

“The  indicator,  which  is  the  third  piece  of  furniture  in  the  room  (or  the 
fourth  if  we  count  the  ‘deadbeats’),  is  a  piece  of  mechanism  to  show  the 
changes  in  the  market.  It  is  something  like  an  old-fashioned  Dutch  clock, 
seven  or  eight  feet  high,  with  an  open  space  at  the  top,  disclosing  three 
figures  and  a  fraction,  as  141%,  at  which  the  market  stood 
when  I  entered.  The  figures  being  movable,  a  slight  manipu¬ 
lation  will  manifest  any  change  in  the  market.  Connected  with  the  indi¬ 
cator  is  a  plain  desk  with  a  book  on  it,  in  which  are  recorded  all  the 
movements  of  the  indicator,  with  the  hour  and  minute  at  which  each  takes 
place.  The  floor  of  the  establishment  is  a  pavement  with  circular  steps  or 
terraces  rising  from  the  centre  to  the  circumference.  ‘  Neat  but  not  gaudy  ’ 
is  the  general  aspect  of  the  premises.  Of  course  such  an  institution  could 
not  exist  without  a  telegraph  office.  Accordingly  we  find  one  communi¬ 
cating  with  the  Gold  Room  by  a  row  of  windows  through  which  dispatches 
are  constantly  passing. 

“  Having  given  the  appearance  of  the  concern,  we  now  come  to  business. 
Three  things  are  in  demand — lungs,  note  books,  and  pencils.  Wow-wow- 
wow,  yah-yah-yah,  from  twenty  or  thirty  throats  around  the  pit  all  at 
once,  and  kept  going  from  morning  till  night,  from  Monday  till  Saturday, 
is  what  presents  itself  to  the  ears  of  the  beholder.  The  voices 
^premium88  at  the  gentry  around  the  circle  are  for  the  most  part  tenori, 
with  now  and  then  a  falsetto  and  a  basso.  I  shall  not  soon 
forget  a  basso  profundo  in  the  ring,  who  drew  his  breath  at  regular  inter¬ 
vals  and  announced  his  desires  with  a  seriousness  truly  remarkable.  He 
was  a  thick  set  man,  with  capacious  chest,  shaggy  head,  keen  eyes,  and  rusty 
whiskers,  which  curved  upward  from  his  inferior  maxillary  line  in  the  most 
determined  manner.  He  cocked  his  head  on  one  side,  thrust  his  chin  as  far 
over  the  railing  as  possible,  and  made  himself  heard  every  time.  He  put  in 
his  B-flat  in  regular  cadence,  like  the  trombone  performer  in  a  mill  pond,  of 
a  summer’s  evening,  drowning  for  the  moment  all  the  fiddles  of  the  frog 
community.” 


Early  in  the  year  1867  the  New  York  Gold  Exchange  Bank  was  organ¬ 
ized.  It  served  as  a  clearing  house,  a  fee  of  $  1  for  each  $100,000  of  gold 
cleared  being  entered  against  its  clients.  Sheets  had  to  be 
BankEXChange  delivered  each  day,  with  checks  for  the  gold  or  currency  due 
to  the  Clearing  House,  at  half-an-hour  after  noon,  and  one 
or  two  hours  later,  the  clearings  having  been  completed,  the  institution 
delivered  to  each  broker  the  gold  or  currency  due  him.  For  the  period 


PHASES  OF  WAR-TIME  SPECULATION 


1G7 


between  the  handing  in  of  his  check  and  the  completion  of  the  clearing  the 
broker  had  no  receipt  for  his  money.  The  bank  also  did  a  general  banking 
business,  a  feature  which  lasted  until  the  great  cataclysm  of  1869  —  Black 
Friday.  The  clearings  at  first  averaged  $70,000,000  a  day,  but  soon 
increased  in  volume.  Memberships  in  the  Gold  Exchange  were  made  salable 
in  November,  1868,  with  an  initiation  fee  of  $500.  About  $5,000  was  the 
highest  price  they  commanded. 


XII 


THREE  NOTABLE  CORNERS 


HE  institutions  and  the  temper  of  Wall  Street  during  the 
decade  which  included  the  Civil  War  are  now  familiar  to  the 
reader.  A  great  deal  of  scene-shifting,  one  can  not  fail  to 
notice,  has  taken  place  on  the  financial  stage  since  then. 
The  stars  of  that  day,  moreover,  are  long  since  gone.  The 
plaudits  and  the  jealousies  they  evoked,  their  ambitions  and 
their  enmities,  belong  to  reminiscence  and  to  history.  New  actors  tread 
the  stage  in  their  places,  portraying  to  similar  audiences  the  same  emo¬ 
tions  and  the  working  of  the  same  motives.  Having  obtained  some  notion 
of  the  setting  of  the  old  plays,  let  us  turn  our  attention  to  the  achievements 
of  the  old  performers.  They  displayed  at  times  a  bolder  and  a  freer  style 
than  any  of  their  successors  command.  No  doubt  the  moralist  who  studies 
its  results  will  rejoice  that  it  has  become  unpopular. 

Commodore  Vanderbilt  was  the  most  prominent  financial  figure  in  the 
sixties,  and  in  some  respects  one  of  the  most  remarkable  men  produced  by 
American  civilization.  There  are  few  parallels,  in  our  country  certainly,  to 
n  ,  his  career — the  rise  of  an  unlettered  youth,  without  the  aid  of 

Vanderbilt’s  the  wealth  or  influence  of  others,  without  the  fortunate  ob- 
marveiious  taining  of  a  monopoly  or  such  a  piece  of  luck  as  the  “  striking  ” 
of  oil  or  gold,  without  the  practice  of  extensive  fraud  and 
without  the  resource  of  gambling,  to  a  position  of  fabulous  affluence  and 
power.  Any  one  who  stops  to  consider  into  how  many  great  fortunes  the 
elements  of  monopoly,  chance  or  dishonesty  enter,  will  get  an  idea  of  what 
Vanderbilt  accomplished.  He  possessed  no  real  monopoly — his  railroads 
and  steamships  had  to  outstrip  vigorous  rivals  on  the  road  to  prosperity. 
Although  he  was  a  great  stock  market  factor,  and  fought  many  a  specula¬ 
tive  battle,  gambling  was  not  one  of  his  essential  steps  to  success.  Neither 
was  fraud.  He  did  a  great  many  things  in  the  course  of  conflict  that 


THREE  NOTABLE  CORNERS 


169 


can  not  be  defended.  But  these  were  really  works  of  supererogation. 
Commodore  Vanderbilt  made  the  great  bulk  of  his  fortune  without  their 
help ;  in  fact,  some  of  them  seemed  to  do  him  more  harm  than  good.  He 
grew  rich  by  building  up,  not  by  breaking  down.  He  accomplished  the 
equivalent  of  the  task  so  praised  by  the  economist — that  of  causing  two 
blades  of  grass  to  grow  where  one  had  grown  before.  It  was  his  practice  to 
buy  a  property  when  mismanagement  had  apparently  ruined  it  and  had 
certainly  made  it  cheap,  and  utterly  to  transform  it  by  sheer  executive 
ability  and  grit. 

From  the  moment  when,  as  a  lad,  he  started  to  plough  a  big  field  on  his 
father’s  Staten  Island  farm,  as  the  means  of  earning  the  price  of  a  sailboat, 
till  the  summit  of  his  career,  Vanderbilt  showed  extraordinary  capacity  for 
work.  His  energy  was  always  as  remarkable  as  his  genius.  There  is  a 
considerable  difference  between  the  two  endowments,  in  spite 
of  the  theory  that  genius  merely  is  the  “capacity  for  taking  foi^ork51^ 
infinite  pains.”  He  was  only  eighteen  years  old  when  the  War 
of  1812  began,  but  he  had  already  won  the  reputation  of  being  a  more 
reliable  boatman  than  any  of  his  competitors.  The  officers  stationed  at 
the  garrisons  in  this  harbor  found  him  to  be  a  medium  for  supplies  that 
could  be  depended  upon.  He  worked  from  dawn  till  nightfall,  sacrificing 
the  comforts  of  good  sleep  and  the  pleasures  that  filled  the  minds  of  other 
lads,  to  the  opportunity  of  getting  ahead.  When  but  twenty  years  old  he 
built  a  schooner  with  his  savings.  He  had  started  his  career  as  a  follower 
of  the  sea.  We  can  not  stop  to  examine  in  detail  the  biography  of  this 
man.  Those  of  his  achievements  which  had  a  direct  bearing  on  Wall  Street 
require,  however,  our  attention. 

By  the  constant  exercise  of  his  energy  and  genius,  Vanderbilt  grew  into 
the  ownership  of  that  fleet  of  steamships  which  earned  him  the  popular  title 
of  Commodore.  After  the  gold  discoveries  of  1849,  and  the  ensuing  rush  of 
wealth-seekers  to  California,  he  got  a  concession  from  the  Nicaraguan 
Government,  permitting  him  to  build  a  railway  across  the  Isthmus,  and, 
connecting  it  with  his  steamship  lines,  he  established  a  service  which  rivalled 
that  of  the  Pacific  Mail  Company.  In  1855  he  reduced  the  profits  of  the 
Cunard  Line  by  running  steamships  between  this  port  and  Havre.  After  the 
old  steam  frigate  “Merrimac” —  sheathed  in  railroad  iron  bars  and  re¬ 
named  the “  Virginia ” by  the  Confederates — had  attacked  theUnion  vessels 
in  Hampton  Roads  with  deadly  effect,  in  March,  1862,  he  gave 
the  Government  his  finest  steamship,  the  “Vanderbilt,”  valued  «  yanLrbUt” 
at  $800,000.  Congress  awarded  him  a  gold  medal.  Two  to  his  country, 
years  later  he  virtually  abandoned  the  sea  as  a  means  of 
making  money.  His  railroad  activities  had  begun.  At  the  time  he  was 
supposed  to  be  worth  $40,000,000,  an  estimate  probably  much  exaggerated. 


170 


THE  NEW  YORK  STOCK  EXCHANGE 


y^^ORNELIUS  VANDERBILT’S  first  experience  with  railroads  was 
rather  unpleasant  for  him,  although  gratifying  to  the  biographer 
as  a  striking  illustration  of  his  indomitable  persistence.  In  1844 — 
when  he  was  fifty  years  old — he  had  been  loaning  money  on  shares  of  the 
New  York  &  New  Haven  Railroad.  He  held,  as  collateral,  stock  of  this 
company  to  the  amount  of  $200,000,  wrhen  its  president,  Robert  Schuyler, 
disappeared,  ten  years  later,  having  foisted  on  the  public  his  famous  issue 
of  spurious  New  Haven  shares.  Schuyler’s  action  was  the  direct  cause  of  a 
suspension  of  the  railroad’s  dividends  until  1861. 1  A  large  portion,  if  not 
all,  of  the  stock  with  which  the  Commodore  had  been  caught  was  fraudulent. 
Immediately  upon  the  revelation  of  the  fact  he  began  suit  to  compel  the 
road  to  accept  these  shares  as  a  genuine  issue.  He  maintained  the  fight 
for  ten  years,  and  won  a  noteworthy,  if  not  a  quite  complete,  success.  On 
May  21,  1864,  the  New  York  &  New  Haven  directors  consented  to  a  com¬ 
promise  which  ended  the  litigation.  They  decided  to  increase  their  capital¬ 
ization  to  compensate  the  holders  of  spurious  stock,  giving  one  share  of 
the  new  issue  for  each  two  shares  of  the  bogus  issue  outstanding. 

Such  an  experience  as  this  was  not  likely  to  remove  the  prejudice  against 
railroads  which  the  steamboat  king  already  cherished.  His  real  entrance 
into  the  railroad  field  was  made  largely  in  view  of  the  fact  that  Daniel  Drew, 
whose  ability  as  a  steamboat  man  had  enforced  the  Commodore’s  respect, 
^  ,  was  willing  to  share  the  risky  venture  with  him.  Drew  was 

Vanderbilt  and  °  47 

Drew  enter  the  Vanderbilt’s  junior  by  three  years,  having  been  born  in  1797 
railroad  field  at  Carmel,  New  York.  These  two  remarkable  men,  alike  in 
their  capacity  for  management  and  finance,  and  for  their 
disregard,  when  expedient,  of  every  consideration  but  the  single  object  in 
sight,  and  totally  dissimilar  in  most  other  ways,  were  drawn  together  by  a 
common  desire  for  gain  and  a  mutual  recognition  of  brains.  Vanderbilt,  as 
the  architect  of  great  enterprises,  was  vastly  the  superior.  Drew,  by  reason 
of  his  peculiarities,  was  quite  as  attractive  to  the  student  of  character. 
Both  were  master  makers  of  Wall  Street  history. 


THICAL  teachers  are  frequently  known  to  impress  upon  those  com¬ 
mitted  to  their  care  the  necessity  of  taking  their  religion  into  the 
routine  of  daily  life.  Among  the  characteristics  of  “  Uncle  Daniel  ” 
Drew  was  the  capacity  to  carry  his  religion  whithersoever  he  went  without 
any  laudable  effect  upon  either  his  religion  or  his  life.  He  seemed  actually 
to  draw  aid  and  inspiration  from  his  faith  for  the  execution  of  the  schemes 
in  which  he  appeared  at  his  worst.  This  was  not  the  fruit  of  hypocrisy. 

1  Seventy-three  Years’  History  of  the  Boston  Stock  Exchange  :  Joseph  G.  Martin.  Boston.  1871. 


THREE  NOTABLE  CORNERS 


171 


One  could  more  easily  understand  it  if  it  were;  for  hypocrisy,  while  not 
among  the  most  common  vices,  is  quite  within  the  range  of  ordinary 
experience.  But  Drew,  in  the  first  place,  had  no  practical  use  for  it.  If  he 
needed  support  for  any  of  his  commercial  or  speculative— it  would  be  harsh 
to  say  piratical — enterprises,  he  did  not  seek  it  from  persons  likely  to  be 
attracted  by  his  spiritual  fervor.  That  fervor  he  really  possessed.  His 
contemporaries  admitted  its  existence  even  while  loudly  ex¬ 


claiming  at  its  failure  to  bring  forth  righteous  fruits.  In  one 


A  fervent 
churchman  and 
a  dangerous 
foe. 


period  of  his  life  Drew  “experienced  religion,”  and  from  that 
time  on  was  a  prominent  figure  at  prayer  meetings  and  the 
source  of  pride  to  many  a  fellow  Methodist.  A  considerable 
proportion  of  churchmen  of  his  faith  seemed  to  have  no  real  understanding 
that  his  piety  was  coupled  with  something  worse.  To  them  he  was  simply 
a  good  man  and  an  acute  financier.  The  probable  solution  of  his  conduct 
was  his  union  of  extraordinary  business  acumen  with  an  ethical  faculty  too 
blunt  to  recognize  any  but  the  most  elementary  distinctions. 

“Uncle  Daniel”  was  not  only  uneducated,  but  as  illiterate  as  anyone 
could  be  who  mingled  with  men  capable  of  speaking  fair  English.  He  wras 
slovenly  in  dress  and  rather  niggardly  in  personal  expenditure.  When  his 
church  was  concerned  he  could  loosen  his  purse  strings ;  but  even  here  his 
natural  greed  had  an  influence.  In  founding  the  Drew  Theological 
Seminary,  at  Madison,  New  Jersey,  he  made  a  large  part  of  his  donation  in 
the  shape  of  personal  notes,  reckoning  that  he  could  “do  better”  with  the 
money,  and  when  he  was  finally  ruined  the  institution  was  a  heavy  sufferer. 
Desire  for  money,  strong  in  almost  every  man,  was  in  him  the  dominant 
passion.  He  showed  it  in  his  youth  as  a  cattle  drover — he  had  taken  up 
that  occupation  after  finishing  the  farming  to  which  his  boyhood  was 
devoted — by  giving  his  beeves  prodigious  quantities  of  salt  and  thus 
making  them  drink  a  great  deal  of  water  and  swell  to  a  marketable  size. 
“Watering  stock,”  as  Wall  Street  knows  it,  is  a  phrase  inspired  by  this 
practice.1  Doubtless,  Drew  thought  himself  quite  justified  in  0rigin  of  the 
overreaching  those  who  bought  his  apparently  fat  cattle,  as  term  “stock- 

Jacob  overreached  Laban  in  the  days  before  the  children  of  watering.” 

Israel  were  a  people.  Like  Jacob,  he  got  prosperity  thereby.  The  Bull’s 
Head  Tavern  and  cattle  yards  at  Twenty-fourth  Street  and  Third  Avenue, 
of  which  he  became  proprietor,  grew  into  a  famous  headquarters  for  New 
York  drovers.  He  was  their  leader  as  well  as  their  host,  having  shown  his 
enterprise  by  bringing  East  the  first  large  drove  of  cattle  that  ever  crossed 
the  Alleghanies,  two  thousand  head  in  all,  purchased  in  Ohio  and  Kentucky. 
It  took  him  two  months  to  reach  this  market  with  the  cattle,  and  the  trip 
involved  much  hardship,  but  the  profits  were  large. 

Twenty-eight  Years  in  Wall  Street:  Henry  Clews.  New  York.  1887. 


172 


THE  NEW  YORK  STOCK  EXCHANGE 


In  1834,  three  years  before  he  left  the  cattle  trade,  Drew  started  the 
steamboat  venture  which  brought  him  into  competition  with  Cornelius 
Vanderbilt.  The  “General  Jackson,”  a  Hudson  River  boat,  owned  by 
Jacob  Vanderbilt,  the  Commodore’s  brother,  was  ruined  through  an  ex¬ 
plosion.  A  friend  of  Drew  induced  the  drover  to  invest  some  money  in  the 
“Waterwitch”  and  endeavor  to  get  the  business  previously  monopolized 
by  the  “  General  Jackson.”  Drew  had  no  sooner  got  into  the  scheme  than 
Cornelius  Vanderbilt  started  to  build  a  new  vessel — the  “Cinderella”  — 
for  Jacob,  and  the  result  was  a  brisk  steamboat  war.  Drew  proved  him¬ 
self  so  strong  a  competitor  that  the  Commodore  effected  a 
a  brisk  battle  compromise  with  him  by  which  the  “Waterwitch”  wras  taken 
mver.6  Hudson  from  the  Hudson  and  plied  between  New  York  and  Hartford. 

This  did  not  succeed,  however,  in  keeping  Drew  out  of  sight 
of  the  Palisades.  He  returned  to  the  Hudson  River  in  1836  with  the 
“Westchester,”  a  steamer  w7hich  he  had  built,  and  with  two  other  vessels 
which  he  had  purchased. 

The  same  year  he  founded  the  banking  house  of  Drew,  Robinson  &  Co. 
A  new  competitor,  the  Hudson  River  Line,  having  appeared,  he  succeeded 
in  making  the  situation  so  unprofitable  for  it  that  he  could  purchase  its 
stock  at  a  reasonable  figure.  He  did  this,  and  soon  afterward  united  his 
steamboat  interests  with  Vanderbilt’s.  The  latter’s  son,  William  H.,  in 
1839,  at  the  age  of  eighteen  years,  entered  Drew’s  banking  house  as  a  clerk. 
Mutual  interest  had  driven  these  two  powerful  men  into  close  affiliation. 
By  1850,  Drew  and  Vanderbilt  were  united  in  the  control  of  a  steamboat 
line  running  from  this  port  to  Stonington,  Connecticut,  and  a  railroad 
connecting  Stonington  with  Boston.  Two  years  later  the  Hudson  River 
Railroad  was  opened.  It  caused  the  steamboat  men  no  alarm,  and,  in  fact, 
resulted  in  no  injury  to  their  business.  Drew  was  prospering  in  Wall 
Street  and  had  been  buying  Erie  stock.  He  retired  from  the  banking  house 
in  1853,  but  returned  to  it  two  years  later,  upon  the  death  of 
Drew  becomes  a  pis  son-in-law,  R.  W.  Kelley,  a  member  of  the  firm.  He  now 
the^Eri^Raiiroad  endorsed  acceptances  of  the  Erie  Railroad’s  floating  debt  to 
the  amount  of  $500,000,  and  in  1857  he  endorsed  further 
Erie  acceptances,  amounting  to  $1,500,000.  It  was  in  this  year  that  he 
became  a  director  of  the  New  York  &  Harlem  Railroad.  Vanderbilt 
entered  the  Harlem  directorate  at  the  same  time,  consenting  to  do  so  only 
in  consideration  of  the  fact  that  Drew  went  with  him. 

Certainly  it  is  curious  that  Cornelius  Vanderbilt  should  have  first  taken 
an  active  part  in  the  railroad  world  through  the  influence  of  a  man  who 
was  destined  to  become  his  bitter  antagonist  in  the  most  strenuous  rail¬ 
road  struggle  of  his  life.  But  circumstances,  not  personal  attachment,  had 
made  them  allies,  and  circumstances  as  readily  made  them  foes.  Men  of 


THREE  NOTABLE  CORNERS 


173 


great  breadth  and  scope  of  mind  recognize  capacity  whenever  they  encoun¬ 
ter  it,  whether  in  friend  or  enemy,  and  Vanderbilt’s  perception  of  Drew’s 
force  and  ability  brought  them  at  the  outset  together.  Having  taken  a 
serious  interest  in  railroad  matters,  the  Commodore  set  vigorously  at 
work  to  make  himself  a  factor  in  the  new  field.  He  began  buying  Erie,  as 
well  as  Harlem,  and  in  1859  put  several  million  dollars  into  Erie  second 
mortgage  bonds.  On  December  7,  1860,  he  entered  the  Erie  directorate, 
taking  the  place  vacated  by  Henry  Sheldon’s  death.  He  brought  about 
needed  improvements  in  the  Harlem  Railroad,  replaced  bad  management 
with  good,  and  awoke  prosperity  with  the  touch  of  his  fingers.  Harlem 
stock,  which  had  sold  for  $6  a  share  in  October,  1857,  had  risen  to  28  on 
January  3,  1863,  and  on  May  1st  of  that  year  an  effective  bull  movement 
carried  it  to  87.  Commodore  Vanderbilt  had  just  secured  the  control  of 
the  road,  and  was  also  busily  engaged  in  buying  the  control  of  the  Hudson 
River  Railroad.  The  way  for  two  great  corners  was  being  paved. 


jENRY  G.  STEBBINS,  who  had  been  president  of  the  Stock  Exchange 
in  1851  and  1858,  was  again  elected  to  that  office  in  May, 
1863,  while  William  Alexander  Smith,  whose  membership  is  now 
the  oldest  in  the  organization,  entered  upon  the  duties  of  treasurer. 
Mr.  Stebbins  was  in  Congress  at  the  time  as  Representative  of  the  First  Dis¬ 
trict  of  New  York,  and  remained  at  his  Washington  post.  His  _  ,  _  , 

.  Stock  Exchange 

election  as  president  of  the  Exchange  was  an  indication  of  the  chooses  a 
desire  of  the  members  to  support  the  Administration.  He  Congressman 
was  of  unquestioned  loyalty,  though  not  of  the  President’s  for  presideut- 
party.  Mr.  Stebbins  was  regarded  as  the  champion  in  Congress  of  the 
financial  interests  of  the  country.  It  was  in  his  third  term  as  president  of 
the  Exchange— which  was  then  domiciled  in  Lord’s  Court— that  the  first 


Harlem  corner  occurred. 

As  early  as  April  6,  1832,  the  State  Legislature  had  passed  an  act 
enabling  the  New  York  &  Harlem  Railroad  Company  to  use  the  streets  of 
this  city  for  a  horse-car  line  whenever  the  Common  Council  of  New  York 
should  see  fit  to  give  their  permission.  In  the  spring  of  1863  Alexander  T. 
Stewart  made  to  the  Legislature  an  offer  of  $2,000,000  for  a  Broadway 
franchise.  The  leading  merchant  of  the  city  was  rebuffed,  and  his  discom¬ 
fiture  was  publicly  laid  to  the  pendency  of  a  bill  to  award  that  very 
franchise  to  a  clique  of  theretofore  unknown  promoters,  with  whom  the 
Legislature  were  believed  to  be  hand-in-glove.  At  this  juncture,  Vanderbilt, 
who  never  failed  to  see  an  opportunity,  asked  the  Common  Council  to 
forestall  the  Legislature  by  giving  him  the  franchise,  on  terms  of  some 
advantage  to  the  city,  under  the  authorization  of  the  Act  of  1832.  The 


174 


THE  NEW  YORK  STOCK  EXCHANGE 


Harlem  trains  at  this  time  ran  as  far  south  as  Twenty-sixth  Street  and 
Fourth  Avenue,  where  the  depot  stood,  and  the  company’s  horse-car 
branch  ran  from  that  point  down  the  avenue  to  the  Bowery,  and  through 
Broome  and  Centre  streets  to  the  City  Hall  Park.  A  measure  was  intro¬ 
duced  in  the  Common  Council,  authorizing  the  New  York  &  Harlem  Railroad 
Company  to  lay  an  additional  single  track  from  their  Fourth  Avenue  line, 
starting  at  a  point  between  Seventeenth  and  Fifteenth  streets,  around 
Union  Square  to  the  corner  of  Broadway  and  Fourteenth  Street,  and 
thence  to  lay  double  tracks  down  Broadway  to  Bowling  Green,  and 
through  State  Street  to  the  foot  of  Whitehall  Street ;  to  lay  a  single  track 
from  Broadway  through  John  Street  to  Burling  Slip,  and  thence  to  South 
Street,  through  South  to  Fulton  Street,  and  back  through  Fulton  to 
Broadway ;  also,  to  lay  double  tracks  on  Twenty-third  and  Twenty-fourth 
streets,  from  Fourth  to  Madison  avenues,  and  through  the  last-named 
thoroughfare  “as  far  as  Madison  Avenue  is  or  may  from  time  to  time  be 
opened.”  In  return,  the  company  was  to  keep  Broadway  well  paved  with 
Belgian  blocks,  to  refrain  from  using  any  but  horse  power,  and  to  pay 
every  year,  as  rental,  ten  per  cent,  of  its  receipts  and  a  license  fee  of  $25  a 
car,  the  total  payments  being  estimated  to  amount  to  about  $300,000  a 
year.  The  Common  Council  passed  the  measure  on  the  evening  of  April 
21st.  Mayor  Opdyke  signed  it,  on  the  ground  that  it  was  a  less  evil  than 
the  “  shameless  bill  ”  pending  at  Albany.  The  franchise  was  an  exceedingly 
valuable  one,  and  in  all  probability  was  not  given  without  some  oiling 
of  the  wheels  of  legislation.  The  members  of  the  Common  Council,  says 
Mr.  Clews  in  his  “Twenty-eight  Years  in  Wall  Street,”  “basely 
deceived  the  Commodore,  after  taking  his  money.”  They 
entered  upon  a  conspiracy  to  make  huge  speculative  profits 
with  the  aid  of  a  repeal  of  the  franchise  at  the  right  moment. 
The  spiritual  Mr.  Drew  is  said  to  have  been  a  partner  in  this 
scheme,  which  he  no  doubt  regarded  as  an  agreeable  pleasantry  at  the 
expense  of  his  good  friend  Vanderbilt. 

With  a  characteristic  desire  to  get  everything  possible  out  of  the 
opportunity,  the  Councilmen  began  to  buy  Harlem  stock  at  first,  in 
expectation  of  profits  on  the  long  side.  The  Commodore  evidently  bought 
it,  too.  By  the  18th  of  May  the  security  had  touched  an 
astounding  figure,  11 6%,  and  the  newspapers  pronounced  the 
price  absurd.  At  about  this  juncture,  the  city  fathers,  believ¬ 
ing  the  harvest  ripe  forthe  sickle,  and  having  disposed  of  their 
long  stock,  started  to  sell  Harlem  short.  Vanderbilt,  who  had 
just  taken  the  presidency  of  Harlem,  was  confronted  with  such 
a  situation  as  his  long  steamboat  career  had  never  produced.  He  was 
playing  with  opponents  who  had  marked  the  cards.  But  he  was  not  with- 


The  Common 
Council  takes 
Vanderbilt’s 
money  and  plans 
to  get  more  of  it. 


Commodore 
Vanderbilt  be¬ 
comes  president 
of  tbe  Harlem 
and  prepares  for 
battle. 


THREE  NOTABLE  CORNERS 


175 


out  good  sources  of  information,  and  soonjunderstood  what  the  Councilmen 
were  doing.  Doubtless  he  experienced  a  passing  thrill  of  indignation  at  men 
who  planned  to  keep  what  he  had  paid  for ;  but  he  was  not  of  the  temper  to 
permit  emotion  to  sway  his  judgment.  He  calmly  proceeded  to  contract  for 
the  purchase  of  what  the  Common  Council  were  eager  to  sell,  reflecting  with 
pleasure  upon  the  fact  that  he  already  had  it  and  they  could  never  get  it. 

The  stock,  of  which  there  were  only  about  57,000  shares,  changed 
hands  at  109  on  June  1st,  and  four  days  afterward  at  106.  It  was  quoted 
at  9714  on  June  9th,  and  the  following  day  broke  with  a  crash  to  83,  rising 
in  the  afternoon  to  89.  By  June  17th  the  members  of  the  Common  Council 
had  driven  it  down  to  77.  The  next  morning  saw  it  descend,  in  the  course 
of  very  heavy  trading,  to  6914,  though  it  jumped  to  79  that  afternoon.  It 
was  a  terrific  struggle  of  bulls  and  bears,  one  wealthy  and  shrewd  old  man 
against  a  horde  of  clumsy  despoilers,  and  the  Street  was  convulsed  with 
excitement.  On  June  24th  the  Herald  remarked,  “A  new  movement  in 
Harlem  is  said  to  be  on  the  tapis,  by  the  same  parties  who  carried  it  to  116 
some  time  since.”  The  stock  had  already  begun  to  ascend. 

The  crucial  moment  had  arrived.  The  Common  Council,  who  had 
fattened  their  purses  some  weeks  before  with  profits  made  on  the  long  side 
of  Harlem,  now  prepared  to  take  further  profits  by  covering  their  extensive 
shorts.  As  a  means  to  that  laudable  end,  at  4  o’clock  on  the 
afternoon  of  June  25th  they  passed  a  resolution  rescinding  BroadwaVgrant 
the  Broadway  grant.  In  the  Court  of  Common  Pleas  Judge 
Brady  issued  an  injunction  restraining  the  Vanderbilt  party  from  con¬ 
tinuing  to  lay  rails  on  Broadway.  They  had  already  laid  a  portion  of  the 
road,  having  overcome  the  obstacles  of  one  previous  injunction.  But  this 
seemed  a  far  more  serious  one. 

Harlem  stock  dropped  only  a  few  points,  selling,  before  the  close  of  the 
day,  at  72.  The  Common  Council  and  their  friends  realized  that  some  one 
was  supporting  it.  On  the  following  day  they  made  an  earnest  effort  to 
cover  their  short  contracts,  and  precipitated  one  of  those  periods  of  wildly 
excited  trading  for  which  the  Stock  Exchange  is  famous.  In  the  Board 
Harlem  sold  between  83  and  94.  The  faithful  servants  of  the  city  dis¬ 
covered,  with  wrath  and  chagrin,  that  the  stock  was  badly  cornered.  They 
had  been  led  to  sell  a  great  deal  more  of  it  than  they  could  possibly  get 
their  fingers  on,  and  Vanderbilt,  over  the  prospect  of  whose  destruction 
they  were  just  now  rubbing  their  hands,  had  been  cruel  enough  to  buy  it. 
On  Saturday,  June  27th,  Harlem  opened  at  93,  rose  to  106,  and  reacted  to 
98%.  “The  chief  owners  of  the  Harlem  property,”  said  the  Times  of  that 
date,  “are  Mr.  Cornelius  Vanderbilt  and  his  immediate  friends,  and  that 
portion  of  the  capital  stock  which  they  have  not  already  paid  for  and 
transferred  to  their  names  they  have  the  cash  means  in  bank  to  pay  for, 


176 


THE  NEW  YORK  STOCK  EXCHANGE 


More  than  the 
road’s  entire 
capital  stock 
sold  by  the 
shorts. 


whenever  the  short  sellers — who  have  contracted  for  more  than  the  entire 
capital — are  ready  to  make  their  deliveries.  The  public  sym¬ 
pathies  are  wholly  with  Mr.  Vanderbilt  in  this  transaction,  and 
there  are  the  most  hearty  congratulations  exchanged  in  the 
Street  to-day,  that  the  shameless  trick  and  fraud  of  the  City 
Council  and  their  stock-jobbing  co-conspirators  have  been 
paid  off  with  compound  interest.” 

On  Monday,  June  29tli,  Harlem  fluctuated  at  the  calls  between  102  and 
106,  and  the  chastened  and  repentant  Councilmen  met  and  annulled  the 
resolution  repealing  the  original  Broadway  grant.  Apparently  they  were 
permitted,  on  that  condition,  to  effect  a  settlement  of  their  short  contracts, 
for  the  stock  at  once  declined  to  94.  “  It  may  seem  anomalous,”  remarked 
a  financial  writer  of  the  time,  “that  Harlem  should  rise  thirty  per  cent,  on 
the  repeal  of  the  grant  and  fall  on  the  repeal  of  the  repeal.  But  people  who 
sold  the  stock  short  understood  the  reason.”  The  wiping  out  of  the 
Councilinen’s  contracts  did  not  eliminate  the  entire  short  interest,  for  before 
long  the  stock  began  once  more  to  rise.  All  throughout  July  (a  month 
famous  for  the  frightful  draft  riots  in  this  city,  which  occasioned  the  raising 
of  $5,000,  by  members  of  the  Stock  Exchange,  for  wounded  policemen  and 
militiamen)  Harlem  shares  were  a  prominent  market  feature,  and  their 
price  gained  ground  in  the  course  of  sharp  fluctuations.  On  August  4th 
the  stock  opened  at  129  and  in  the  afternoon  soared  to  135.  Three  days 
later  it  touched  141%.  On  August  14th  it  closed  at  149.  The  following 
day  it  opened  at  154  and  sold  up  to  163%,  while  the  rumor  that  Vanderbilt 
had  arranged  with  the  Common  Council  for  “large  and  new  privileges,” 
stole  around  the  Street.  The  rumor  was  fallacious.  The  fact 
Completion  of  was  that  the  corner  wTas  nearing  culmination.  The  stock 

the  Commodore  s  0 

first  comer.  sagged  back  a  trifle,  and  on  August  17th  sold  up  to  17 4.  Five 
days  later  it  changed  hands  in  the  William  Street  curb  market 
at  177%.  On  Monday,  August  24th,  occurred  the  final  spasm  of  the  bears 
for  whom  the  veteran  financier  was  gunning.  Harlem  reached  179  on  the 
Stock  Exchange  and  179%  in  the  Coal  Hole,  on  sales  made  in  the  regular 
way,  while  500  shares  were  sold,  buyer  sixty  days,  at  180.  The  first  great 
Harlem  corner  was  over.  In  December  the  stock  fell  to  87%. 


HILE  Commodore  Vanderbilt  was  punishing  his  enemies  in  Harlem 
he  was  also  engaged  with  another  group  of  antagonists  who  had 
started  a  bear  campaign  against  the  Hudson  River  Railroad 
Company’s  securities,  of  which  he  had  become  an  extensive  holder.  The 
stock  of  this  company  comprised  about  44,000  shares.  The  Hudson  comer 
began  after  the  struggle  in  Harlem  had  started,  and  finished  long  before 


THREE  NOTABLE  CORNERS 


177 


the  conclusion  of  the  latter.  Here  was  a  tremendous  test  of  the  force  and 
ingenuity  of  this  man’s  mind.  He  had  attained  the  age  of  sixty-nine  with¬ 
out  any  experience  of  genuine  stock  market  battles,  when  he 
was  suddenly  called  upon  to  defend  two  of  his  properties  from  A  draetlc  te8t 

A  A  of  his  capacity. 

the  onslaught  of  experienced  depreciators  of  value,  aided  in 
one  case  by  corrupt  city  officials  who  wielded  peculiar  power.  To  come  out 
unscathed  required  executive  capacity  of  the  first  order.  He  came  out  not 
only  unscathed  but  wdth  greater  wealth  and  prestige  than  ever. 

The  market  value  of  Hudson  stock  on  June  20, 1863,  was  $123  a  share, 
and  represented  the  result  of  a  bear  campaign  which  had  then  lasted 
several  weeks.  Vanderbilt  began  to  buy  it,  and  kept  on  buying  steadily, 
despite  the  Harlem  difficulty  which  he  had  presently  to  face.  His  brokers 
picked  up  all  the  cash  stock  available  and  all  the  sellers’  options.  The 
Commodore  then  devised  a  scheme  which  probably  has  no  superior  in  the 
records  of  speculative  ingenuity.  It  is  related  by  Mr.  Clews,  who  was 
contemporary  with  the  event.1  Vanderbilt  instructed  his  brokers  to 
approach  several  prominent  bear  houses  and  ask  them  to  “turn  ”  Hudson ; 
in  other  words,  to  purchase  it  for  cash  from  the  Commodore  and  his  friends 
and  sell  it  back  to  them  on  buyers’  options,  which  would  run  for  “periods 
varying  from  ten  to  thirty  days.”  The  bears  jumped  to  the 
conclusion  that  the  offer  was  made  because  the  cornerers  were 
short  of  cash,  and  inasmuch  as  they  could  get,  by  selling  the 
stock  on  buyers’  options,  a  better  price  than  they  would  have 
to  pay  for  it,  the  project  seemed  to  involve  a  sure  profit. 

They  cheerfully  entered  into  it,  and  several  thousand  shares  were  “turned.” 
At  about  this  stage  of  the  movement  the  Times  printed  a  favorable  report 
of  the  earnings  of  the  Hudson  Railroad.  On  July  3d  the  price  of  the  stock 
had  risen  to  15514,  and  the  bears  were  in  difficulties.  Some  50,000  shares 
had  been  sold  short.  The  sellers’  options  were  falling  due,  and  the  Commodore 
created  wide  distress  by  calling  the  stock  which  he  had  contracted  to  buy. 
When  the  bear  leaders  who  had  kindly  agreed  to  “turn”  Hudson  found  that 
they  were  expected  to  deliver  at  once,  and  at  figures  far  below  those  of  the 
existing  market,  and  that  the  stock  was  practically  impossible  to  obtain, 
their  wrath  was  hot.  But  it  had  no  effect  on  the  venerable  Commodore. 
He  simply  expressed  a  desire  to  receive  what  was  due  him. 

With  a  proper  regard  for  the  extremity  of  the  situation  he  Hudson  stock 
consented  to  lend  his  bearish  friends  the  stock  they  needed  to  loaned  at  t'J0 

per  cent,  a  day. 

deliver.  The  intensifying  struggle  produced  some  striking 
phenomena.  On  July  9th  Hudson  sold  at  180,  cash,  and  at  150,  seller  two 
weeks.  On  the  day  following  the  price  was  179,  cash  and  regular,  and  172, 
seller  three  days.  A  day  later  the  price  was  177,  but  two  per  cent,  a  day 

x Twenty-eight  Teaks  in  Wall  Street:  Henry  Clews.  New  York.  1887. 


How  one  may 
get  aid  and 
comfort  from 
the  enemy. 


178 


THE  NEW  YORK  STOCK  EXCHANGE 


was  being  paid  for  the  use  of  the  stock  and  fifteen  per  cent,  for  a  ten 
days’  option.  “Wall  Street,”  said  the  Herald ,  dispassionately,  “has  never 
known  so  successful  a  corner.  The  regular  bears  of  the  Board— the  men 
who  have  been  accustomed  to  ‘ hammer’  other  men’s  property  as  a  playful 
diversion— are  suffering  severely.”  The  Hudson  corner  was  about  to  be 
broken.  The  stock  sold  at  179  on  July  14th,  and  a  settlement  was  then 
effected.  Beaten,  humiliated,  and  enlightened,  the  bears  seized  the  chance 
to  escape  from  the  pit  at  a  tremendous  loss,  and  a  week  later  the  price  of 
the  securities  with  which  they  had  sought  to  divert  themselves  fell  to  $140 
a  share. 

Vanderbilt  was  perfectly  willing  to  retain  a  majority  of  the  Hudson 
stock.  But  he  did  not  wish  to  be  saddled  with  it  all,  and  he  succeeded 
in  marketing  a  portion  of  it  at  a  profitable  figure  before  regarding  the 
incident  as  closed. 


MM 

M 


needed  to  be 
doubly  taught 


N  admirable  illustration  of  the  difficulty  with  which  the  average 
man  learns  wisdom  from  any  experience  but  his  own  is  furnished 
by  Cornelius  Vanderbilt’s  second  corner  in  Harlem.  The  states¬ 
men  at  Albany,  in  the  spring  of  1864,  were  well  aware  of  the  misfortune 
into  which  the  statesmen  at  New  York  had  plunged  themselves,  less  than 
a  year  before,  by  their  bear  campaign  against  this  stock.  Yet  they  rushed 
fatuously  into  a  similar  attempt,  as  if  Vanderbilt  had  been 
a  lesson  that  proved  an  easy  victim.  Perhaps  the  public  treasury,  the 
customary  object  of  their  conspiracies,  had  lately  been  too 
well  safeguarded.  Perhaps  the  opportunities  for  fleecing 
corporations  were  more  restricted  than  they  are  to-day.  Or,  perhaps,  they 
had  achieved  such  success,  in  raids  of  one  sort  or  another,  as  to  become 
intoxicated  by  good  fortune  and  reduced  to  the  mental  condition  of  a 
beast  of  prey  which  has  tasted  blood.  At  all  events,  they  planned  a  bear 
campaign  against  Harlem,  based  on  the  repeal  of  a  favorable  measure 
after  the  impression  had  been  spread  that  they  would  pass  it. 

This  bill  was  framed  to  give  the  Harlem  Railroad  the  very  Broadway 
grant  which  was  the  bone  of  contention  in  the  previous  fight.  Vanderbilt 
had  been  forced  to  meet  injunction  after  injunction  brought  by  taxpayers, 
and  at  length,  in  October,  1863,  an  order  by  Judge  Hogeboom,  in  the 
Supreme  Court,  had  prevented  his  continuing  to  lay  rails  on  the  great  busi¬ 
ness  thoroughfare  of  New  Y.ork  City.  He  needed  some  further  authority. 
A  measure  conferring  it  was  introduced  in  the  State  Senate  by  Mr.  Dutcher. 
On  March  9, 1864,  Horace  F.  Clark,  the  Commodore’s  son-in-law,  and  four 
other  Harlem  directors,  among  them  “Uncle  Daniel”  Drew,  appeared  be¬ 
fore  the  Senate  Committee  on  Railroads  in  favor  of  this  bill.  Judge  Hilton, 


THREE  NOTABLE  CORNERS 


179 


representing  A.  T.  Stewart,  opposed  it,  and  renewed  Mr.  Stewart’s  offer  of 
$2,000,000  for  the  franchise.  Both  Mr.  Clark  and  Judge  Hilton  were 
wasting  their  eloquence.  They  understood  the  railroad  business  and  the 
law,  but  Drew  understood  the  Senate  Committee. 

What  sweet  persuasion  the  veteran  cattle  drover  threw  into  his  voice, 
what  convincing  logic  he  brought  from  the  recesses  of  his  mind,  no  record 
remains  to  declare.  Certainly  he  found  willing  ears.  There  were  some 
among  the  Albany  statesmen  who  yielded  to  the  conviction  that  they 
could  easily  advance  their  own  material  welfare  while  promoting  the  public 
good.  But  Drew’s  remarks  to  the  Senators  were  made  in  strictly  private 
conversation.  Gradually  the  impression  spread  that  the  bill  was  sure  to 
go  through.  Harlem  stock  rose  buoyantly  in  the  market,  and,  astonishing 
to  say,  those  who  supplied  it  with  a  free  hand  were  Daniel  Drew  and  his 
friends.  On  March  22d  the  Senate  Committee  on  Railroads  met  and 
decided  to  report  unfavorably  on  the  bill.  The  shock  to  the  market  was 
instant.  Harlem,  which  had  risen  to  149  a  few  days  before,  fell  to  136. 
The  bill  came  before  the  Senate.  It  was  valiantly  defended  by  Senator 
Dutcher,  who  declared  that  those  who  opposed  the  measure  had  been  in 
Wall  Street  “  betting  great  odds”  that  the  report  would  be  unfavorable,  and 
selling  the  stock  short.  Nobody  replied.  Mr.  Drew’s  argument  in  private 
proved  far  weightier  than  that  of  Mr.  Dutcher  in  public.  The  committee 
report  was  endorsed,  and  on  the  following  day,  March  26th,  Harlem  stock 
sold  down  to  101.  A  measure  similar  to  the  Senate  bill  was  introduced  in 
the  Assembly  and  sent  to  a  committee,  in  whose  hands  it  quietly  died. 

Vanderbilt  felt  that  it  was  dangerous  to  cope,  unaided,  with  the  bear 
movement.  Having  discovered  what  was  going  on  he  enlisted  the 
cooperation  of  John  M.  Tobin,  in  former  days  a  gate-keeper  in  a  Staten 
Island  ferry  house,  but  now  a  wealthy  and  resourceful  speculator.  Tobin 
had  been  associated  with  Vanderbilt  in  the  previous  Harlem  corner,  much 
to  his  profit,  and  was  now  carrying  a  considerable  portion  of  the  stock. 
He  contributed  a  large  sum — said  to  be  $1,000,000— to  a  new  war  fund. 
He  and  Vanderbilt  kept  buying  the  stock  of  which  Drew  and  his  legislative 
allies  showed  such  anxiety  to  dispose.  At  length  they  had  either  purchased, 
or  held  contracts  to  purchase,  some  27,000  more  shares  of  Harlem  than 
ever  had  been  issued.  The  stock  rose  to  152,  and  by  March  31st  the 
bears  had  driven  it  back  to  122.  But  at  this  juncture  they 
discovered,  by  experiment,  that  it  was  difficult  to  cover  their  Futility  of 
contracts.  As  they  began  the  attempt  Harlem  rose.  On  foade^dfce!11 
April  2d  it  closed  at  137%.  A  week  later  it  was  175.  On  April 
18th  it  sold  up  to  195  in  the  morning  and  closed  at  183  in  the  afternoon  — 
one  transaction,  seller  sixty  days,  being  made  at  168.  Two  days  later 
the  stock  reached  205.  On  April  21st  the  Herald  announced  that  a 


180 


THE  NEW  YORK  STOCK  EXCHANGE 


bill,  authorizing  the  Harlem  Railroad  to  increase  its  capital  stock  by 
$3,000,000,  for  the  purpose  of  completing  its  double  track,  and  permit¬ 
ting  Harlem  bondholders  to  convert  their  bonds  into  stock,  had  passed 
the  Assembly.  It  is  not  quite  plain  in  whose  interests  the  measure  was 
pressed.  However,  Harlem  advanced  that  day  to  208,  and  two  days  later 
the  Legislature  adjourned  and  the  stock  reached  220. 

“The  bears  of  the  lobby,”  said  the  Herald,  in  an  Albany  dispatch  pub¬ 
lished  on  April  27th,  “have  met  their  match  this  year.  In  defeating 
Harlem  they  imagined  they  had  a  monster  operation  in  selling  Harlem 
short,  and  thus  ran  foul  of  Commodore  Vanderbilt,  and  have  met  with  a 
heavy  loss,  some  of  them  now  wearing  the  title  of  ‘lame  ducks.’”  The 
same  newspaper  declared,  three  days  afterward,  that  the  bear  clique  had 
dropped  about  $3,000,000,  and  that  the  principal  losers  were  Daniel  Drew, 
Erastus  Corning,  Jr.;  Jerome  &  Co.,  and  Thurlow  Weed,  the  Republican 
leader. 

Harlem  sold  at  235  on  May  9th  and  at  261  on  May  11th.  A  new  trick 
was  now  tried  by  the  desperate  bears.  The  annual  Harlem  election  was 
set  down  for  the  17th.  An  anonymous  circular  appeared  in  the  Street, 
praising  the  former  president  of  the  road,  Allan  Campbell,  who  had  been 
replaced  by  Vanderbilt  the  year  before,  and  attacking  the  men  in  control, 
of  whom  it  said :  “At  their  annual  election,  a  year  ago,  they 
attal^on^he3  c^sP^ace(^  some  of  the  ablest  directors  that  ever  adorned  the 
Vanderbilt  party,  councils  of  any  railroad  board,  and  put  in  their  stead  brokers 
and  stock  speculators,  some  of  whom  have  been  engaged  in 
‘cornering’  the  corporation  of  this  city  and  the  Legislature  of  the  State, 
and  putting  the  stock  up  to  the  visionary  price  of  260  per  cent.,  and  com¬ 
pelling  the  shorts  to  pay  this  ridiculous  price  to  obtain  their  stock  to 
deliver.  ...  So  great  have  been  the  speculations  in  the  stock  of  this 
company  that  the  management  of  its  affairs  has  been  woefully  neglected.” 

The  eloquence  of  this  soul-stirring  appeal  was  fruitless.  It  did  not 
create  any  more  stock,  and,  needless  to  say,  it  did  not  soften  the 
Commodore.  Harlem  had  reached  275  on  May  14th,  and  three  days  later 
Vanderbilt  was  victorious  at  the  election  and  the  stock  sold  at  280.  On 
June  1st  the  comer  culminated,  Harlem  selling  at  $285  a  share,  and 
many  of  the  shorts  settling  at  that  figure.  An  odd  lot  sold  at  260  the 
next  day,  but  the  regular  price  remained  285  as  late  as  the  middle  of  July. 
The  stock  was  virtually  dead  thereafter.  To  all  intents  and  purposes  its 
speculative  race  was  run  with  the  settling  of  this  corner.  The  discomfiture 
of  the  Albany  statesmen  was  always  a  delightful  reminiscence  to  Vanderbilt. 
“We  busted  the  whole  Legislature,”  he  was  wont  to  remark,  “and  scores 
of  the  honorable  members  had  to  go  home  without  paying  their  board 
bills.” 


THREE  NOTABLE  CORNERS 


181 


Among  the  speculators  badly  hurt  by  this  corner  was  John  Morrissey, 
the  prize-fighter.  Morrissey  later  won  Vanderbilt’s  favor  by  giving  him  a 
fine  pacing  horse,  which  had  excited  the  railroad  monarch’s  admiration. 
He  received  in  return  a  sufficient  number  of  “points”  on  the  markets  to 
enable  him  to  recoup  his  losses.  The  Broadway  franchise  of  the  Harlem 
Railroad  was  never  revived.  In  May,  1866,  the  Aldermen  ordered  the 
removal  of  the  tracks  that  were  put  down  in  1863. 

Before  taking  temporary  leave  of  the  hero  of  the  Harlem  and  Hudson 
corners,  let  us  glance  at  an  incident  which  a  writer  of  his  generation 
related,  illustrating  his  tendency  to  make  use  of  every  one  who  came  his 
way.  The  story  must  stand  on  its  merits.  It  runs  to  this 
effect:  Cornelius  Vanderbilt  had  in  mind  an  upward  move-  a  story  that 

•  illiistrSitos  o# 

ment  in  Hudson  stock,  and,  with  a  view  to  purchasing  some  weakness, 
of  it  at  satisfactory  figures,  advised  his  son,  William  H.,  to 
sell  it.  The  market  quotation  was  110.  The  son  expressed  his  thanks  for 
the  advice,  but,  having  inherited  some  of  his  father’s  shrewdness,  decided 
to  investigate.  He  learned  that  the  Commodore  was  unostentatiously 
absorbing  Hudson  stock,  and  began  to  buy  on  his  own  account.  When 
the  price  reached  137  the  elder  Vanderbilt  visited  his  son’s  office  and 
asked  him  how  much  he  had  lost.  Here  let  our  authority  proceed : 

“  £I  went  in  at  110  on  10,000  shares.  That  ought  to  make  me 


$260,000.’ 

“  ‘Very  bad  luck,  William,’  quoth  the  father — trying  to  look  extremely 
troubled  —  ‘very  bad  luck  this  time.’ 

“  ‘But  then  I  bought,  and  so  made.’ 

“  ‘  Eh  ?  What  set  you  doing  that,  sir  ?  ’ 

“  ‘  Oh,  I  heard  that  was  your  line,  and  so  concluded  that  you  meant 
long  instead  of  short.’ 

“  ‘Ahem !  ’  croaked  Vanderbilt  here,  as  he  buttoned  up  his  fur  overcoat 
and  stalked  out  of  the  open  door.  He  has  always  had  a  high  opinion  of 
William  since  that  event.” 


XIII 

SOME  MARKET  BATTLES  OF  THE  SIXTIES 

MONG  eager  speculators  who  dabbled  in  stocks  and  gold 
while  the  Civil  War  was  in  progress  were  many  whose 
success  brought  them  considerable  repute,  without  making 
any  serious  impression  upon  the  times.  They  acquired 
money  rapidly,  and  frequently  lost  it  rapidly;  but  their 
operations  were  of  transient  influence  and  did  practically 
nothing  to  alter  conditions  existing  in  the  railroad  or  industrial  fields. 
Each  had  his  coterie  of  followers,  who  regarded  him  as  a  hero.  It  was 
indeed  a  custom  of  the  small  speculators  to  carry  funds  to  the  larger  ones, 
asking  that  the  money  should  be  “invested”  in  accordance  with  better 
judgment  and  opportunity  than  their  own,  and  doubtless  consenting  to  a 
profit-sharing  arrangement.  Important  as  the  daring  and  successful 
operators  seemed  in  their  day,  it  is  impossible  to  relate  even  a  good 
proportion  of  the  feats  that  gave  them  reputation.  This  narrative  must 
be  confined,  in  the  main,  to  those  speculations  that  involved  the  leaders  of 
the  market  or  that  became  salient  features  in  the  market’s  history. 

Nor  should  it  be  forgotten  that  some  of  the  winners  of  high  stakes 
could  hardly  be  ranked  as  operators  of  the  first  class.  It  was  a  time  when 
profits  or  losses  were  necessarily  large.  With  a  constant  succession  of 
events  which  sharply  affected  prices,  there  was,  of  course,  a 
sharp  fluctua-  great  deal  of  fluctuation  in  the  market.  Throughout  the  time 
in  war  times.  °*  the  war>  the  great  emissions  of  Government  notes — our 
currency  had  been  swelled  thereby  to  about  $876,000,000  in 
June,  1864 — and  the  general  distrust  of  the  public  credit,  caused  a  green¬ 
back  depreciation  and  a  corresponding  rise  in  the  prices  of  stocks  and  gold, 
as  has  been  observed  in  preceding  chapters.  This  enabled  many  an 
operator,  possessed  merely  of  sufficient  shrewdness  to  see  that  fresh  issues 
of  paper  money  meant  higher  quotations  on  the  Stock  Exchange,  to  make 


SOME  MARKET  BATTLES  OF  THE  SIXTIES 


183 


a  fortune.  The  fictitious  prosperity  of  the  time  stimulated  a  buying  move¬ 
ment  on  the  part  of  the  public  which  was  a  substantial  aid  to  the  habitual 
bull.  During  the  greater  part  of  the  war  period  any  one  operating  for  a 
rise  had  the  chances  in  his  favor.  Prices  did  not  return  to  a  normal  basis 
until  about  eight  years  later,  but  they  were  scaled  down  to  some  extent  at 
the  close  of  hostilities.  How  close  a  connection  was  maintained  between 
the  gold  quotation  and  the  selling  values  of  merchandise  has  already  been 
made  manifest.  A  leading  New  York  journal,  in  November,  1864,  carried 
an  advertisement  reading:  “In  consequence  of  the  success  of  the  Union 
Army  and  the  fall  in  gold,  I  now  offer  the  whole  of  my  stock  of  gentlemen’s 
furnishing  goods  at  reduced  prices. —  S.  W.  H.  Ward,  387  Broadway.” 


M 

m 


FAIR  idea  of  the  course  of  prices  throughout  the  Civil  War  may  be 
obtained  from  the  following  table.  The  data  are  chiefly  taken 
from  the  issue,  for  1868,  of  Henry  Y.  Poor’s  “Manual  of  the  Rail¬ 
roads” — probably  the  best  authority  existing,  inasmuch  as  stock  tickers 
were  not  introduced  until  1867,  and  the  Stock  Exchange  had  preserved  no 
price  records : 


1861.  1862.  1863.  1864.  1865.  1866. 


Stock. 

High. 

Low.  High.  Low.  High.  Low. 

High. 

Low. 

High.  Low.  High. 

Low. 

Cleveland  &  Pittsburg, 

17 

6% 

59 

15% 

115 

56% 

132 

90 

99% 

51 

96% 

75% 

Harlem,  .... 

17 

8% 

25% 

11% 

179 

27% 

285 

86% 

— 

— 

— 

— 

Hudson,  .... 

m 

3% 

79 

35% 

180 

82 

164 

107 

117% 

88 

137 

98% 

Pittsb’h,  Ft.  W ayne  &  Chicago, 

— 

— 

— 

— 

96 

56 

152% 

82% 

107 

77% 

111% 

88 

Philadelphia  &  Reading,  . 

47% 

29% 

79 

35 

128 

77% 

165 

111 

118% 

80% 

118% 

96% 

Michigan  Southern,  . 

20 % 

10% 

47 

19 

113 

45% 

118% 

57 

84% 

49% 

101 

65% 

Erie, . 

m1 

171 

65% 

31% 

122 

66 

126% 

82 

98% 

44% 

97% 

57% 

The  figures  marked  1  are  taken  from  the  table  published  by  Mr.  Eames 
in  “The  New  York  Stock  Exchange.” 


HHE  gigantic  capitalizations  of  the  present  day  were  unknown  in  the 
sixties.  By  reason  of  the  comparatively  small  amount  of  any  one 
company’s  outstanding  stock,  violent  movements  were  easily  pro¬ 
voked.  Corners  were  then  fairly  common  phenomena.  Occasionally  they 
resulted  in  great  opportunities  for  bear-baiting.  Occasionally  they  proved 
failures.  Two  manipulative  enterprises  of  this  class  were  attempted  in  the 
late  winter  and  early  spring  of  1864  by  Anthony  Wellman  Morse,  whose 
career  was  dazzling  while  it  lasted.  The  first  of  his  efforts  ended  in  what 
was  a  very  slender  triumph,  owing  to  the  treachery  of  an  ally.  The  second 
culminated  in  his  ruin. 

Morse  was  barely  thirty  years  old  at  the  time,  and  had  already  survived 
two  failures,  the  second  of  which  was  coincident  with  the  difficulty  between 


184 


THE  NEW  YORK  STOCK  EXCHANGE 


the  United  States  and  Great  Britain  over  the  “ Trent”  affair,  in  November, 
1861.  He  had  subsequently  retired  from  a  partnership  with  his  brother 
and  had  formed  another  with  Isaac  Kip,  Jr.,  at  No.  24  William  Street.  He 
operated  freely,  and  with  great  success,  on  the  bull  side.  In  the  spring  of 
1863  he  sailed  for  Europe  in  a  small  yacht,  the  exploit  attracting  much 
attention.  He  was  feted  and  flattered  abroad,  and  heard  a  thousand  argu¬ 
ments  to  convince  him  that  the  North  was  bound  to  fail,  that  the  greenbacks 
would  be  repudiated  and  his  country  plunged  in  disaster.  He  returned  a 
bear  on  the  future  of  the  national  credit  and,  of  course,  a  bull  on  gold  and 
stocks.  At  this  period,  we  have  seen,  the  bull  had  things  his  own  way. 
Morse  plunged  heavily,  his  fortune  swelled,  and  his  reputation  grew  apace. 

The  idler, the  “lame  duck,” and  the  speculative  novice  infested 
Triumphs  of  pis  office  and  sought  for  the  crumbs  of  wisdom  that  fell  from 
Morse11"7  W’  his  table.  Having  once  taken  on  a  heavy  line  of  securities,  he 
had  but  to  whisper  to  these  gossips,  “This  or  that  stock  will 
rise,”  and  a  buying  movement  was  presently  started.  In  selling  shares  to 
those  whom  he  advised  to  buy  he  had  a  safe  means  of  completing  almost 
any  operation.  He  became  a  promoter  as  well,  and  possessors  of  capital 
scrambled  to  get  their  names  on  his  books.  The  story  is  related  of  Morse 
that,  on  the  day  subscriptions  were  opened  for  the  stock  of  a  coal-mining 
company  he  had  organized,  one  man  pushed  through  an  eager  crowd  to 
take  a  large  block  of  the  shares,  turned  away,  and  then,  coming  back  sud¬ 
denly,  approached  the  young  financier  and  asked,  “I  say,  Mr.  Morse,  was 
that  gold  or  coal  stock  that  I  just  subscribed  for?  ” 

In  December,  1863,  Morse  joined  hands  with  Dr.  Thomas  C.  Durant — 
whose  connection  with  the  Credit  Mobiliev  in  this  country  will  later  demand 
our  attention — for  the  purpose  of  advancing  the  stock  of  the  Chicago  & 
Rock  Island  Railroad.  Dr.  Durant  was  the  contractor  who  built  the  road. 
In  the  course  of  the  winter,  Morse  and  Durant  succeeded  in  purchasing  or 
getting  options  on  all  of  its  outstanding  56,030  shares,  and,  through  the 
imprudence  of  the  bears,  had  contracts  to  receive  a  considerable  amount  of 
stock  in  excess  of  the  actual  capitalization,  Wall  Street  being  rich  in  oppor¬ 
tunities  to  buy  what  does  not  exist,  and  thus  to  make  a  profit.  The  stock 
was  advanced  from  107  to  149%.  Morse  superintended  the  manipulation, 
representing  a  clique  of  several  members.  He  had  a  portion 


One  of  his 
corners  abruptly 
ended  by  the 
treachery  of  an 
ally. 


of  the  stock  loaned  out,  and  bought  all  that  was  offered.  Sud¬ 
denly  he  discovered  that  among  the  certificates  that  were 
delivered  to  him  were  some  belonging  to  one  of  his  confeder¬ 
ates,  and  which  were  to  have  been  kept  off  the  market.  One 
member  of  the  pool  had  turned  traitor  and  was  taking  advantage  of  the 
high  price  to  unload  his  private  holdings  on  his  allies.  His  action  had 
caused  a  recession  of  the  stock  to  144  on  February  1,  1864,  and  by 


SOME  MARKET  BATTLES  OF  THE  SIXTIES 


185 


February  10th  it  had  fallen  to  132.  There  was  nothing  to  do  but  to  effect  a 
private  settlement  with  the  shorts.  This  was  arranged  as  quickly  as  possible, 
and  on  February  12th  the  corner  was  over  and  Rock  Island  touched  117. 

The  corner  was  profitable  on  the  whole,  despite  the  unexpected  betrayal, 
and  Morse  determined  to  repeat  his  achievement  in  the  stock  of  Pittsburgh, 
Fort  Wayne  &  Chicago,  which  he  had  been  acquiring  for  months.  The 
market  commenced  to  display  danger  signals,  and  on  March  27th  there 
began  an  issue  of  Clearing  House  certificates.  March  10th  witnessed  a 
sharp  break,  Philadelphia  &  Reading  falling  4  points ;  Illinois  Central,  2% ; 
Harlem,  1 %;  Michigan  Central,  2%;  Hudson,  2%;  Cleveland  &  Toledo,  2%, 
and  Cumberland  Coal,  15.  Morse  was  not  a  whit  disturbed,  but  kept 
pushing  Fort  Wayne  upward  until,  early  in  April,  the  stock,  which  had 
sold  as  low  as  56  in  the  preceding  year,  touched  152%,  the  movement  being 
aided  by  publication  of  the  road’s  good  earnings.  Secretary  Chase, 
chagrined  at  the  continued  depression  of  greenbacks,  deter¬ 
mined  at  this  juncture  to  offset  the  movement  by  liberal  sales  Government 
of  gold.  Morse  was  a  bull  on  gold,  and  was  likewise  intoxi¬ 
cated  by  a  success  that  had  come  too  soon  for  his  own  good.  He  learned 
of  Mr.  Chase’s  intention,  and  promptly  telegraphed  him  that  he  stood  ready 
to  buy  all  the  gold  that  the  Government  cared  to  sell. 

Whether  this  astonishing  offer  was  the  result  of  empty  bravado,  or  was 
made  public  in  order  to  strengthen  a  frightened  market,  the  reader  may 
judge.  Of  its  folly  there  can  be  no  question. 

Secretary  Chase  came  to  this  city.  His  mere  presence  was  sufficient  to 
cause  a  sharp  market  setback  on  Friday,  April  15th;  but  worse  things  were 
to  come.  He  threw  upon  the  market  gold  to  the  amount  of  about 
$9,000,000,  and  at  the  same  time  announced  that  the  greenbacks  in  circu¬ 
lation  were  being  withdrawn,  and  that  the  Government  had  no  intention  of 
making  additional  issues  of  interest-bearing  legal  tenders.  The  Govern¬ 
ment  notes  which  he  received  in  payment  for  the  yellow  metal,  amounting 
to  more  than  $15,000,000,  he  locked  in  the  Sub-Treasury.  Gold,  which 
had  risen  from  166%  on  March  9th  to  173%  on  April  16th,  dropped  about 
two  points  as  a  result  of  the  Secretary’s  sales,  in  spite  of  the  bulls’  efforts  to 
sustain  the  market.  On  Monday,  April  18th,  it  fluctuated 
between  169%  and  171%.  This  recession  was  ominous  in  itself; 
but  the  financial  stringency,  resulting  from  the  lockup  of  the 
greenbacks,  was  far  more  effective.  Two  hours  after  the  opening  of  business 
on  Monday  the  failure  of  Morse  &  Co.  was  announced  from  the  rostrum  of 
the  Stock  Exchange.  Fort  Wayne  stock,  which  closed  at  142%  on  Satur¬ 
day,  had  opened  at  120,  and  Morse  had  driven  it  seven  points  higher  in  a 
last  effort  to  save  himself.  When  he  suspended  payment  the  stock 
dropped  like  a  shot  to  108%.  It  closed  two  and  one-half  points  lower. 


186 


THE  NEW  YORK  STOCK  EXCHANGE 


Concurrently  the  general  list  receded.  The  disaster  of  that  day  is 
known  in  Wall  Street  history  as  “the  Morse  panic.”  Before  the  succeeding 
Friday  twelve  failures  accompanied  the  downfall  of  the  dashing  manipu¬ 
lator  of  Fort  Wayne.  One  of  those  who  failed  to  meet  their  engagements 
was  Samuel  Hallett,  who,  not  long  before,  had  contrived  to  extricate  himself 
from  difficulties  incurred  while  fiscal  agent  in  New  York  for  the  State  of 
Indiana.  At  this  time,  though  still  under  forty,  he  had  been  by  turns 
school  teacher,  lumberman,  book-keeper,  and  country  banker,  finally  entering 
the  whirlpool  of  speculation.  He  was  a  man  of  intense  mental  and  physical 
energy,  a  born  promoter,  and  of  a  genius  that  would  have  made  him 
great  if  he  had  been  more  scrupulous  and  could  have  lived  to  carry  out  his 
worthiest  projects.  Hallett  had  made  and  lost  huge  sums  by  his  audacious 
operations,  and  even  in  his  emergency  held  a  large  retinue  of  loyal 
followers  inspired  by  his  courage  and  imagination.  His  career  was  not 
ended  in  the  Morse  panic  that  left  him  penniless.  A  few  newspaper  men,  one 
of  them  the  editor  of  this  volume,  called  his  attention  to  the  potentialities  of 
the  grants  offered  by  Congress  for  the  construction  of  a  transcontinental 
railroad.  He  threw  himself  heart  and  soul  into  the  formation  of  a  com¬ 
pany,  of  which  he  induced  John  C.  Fremont  to  become  the  nominal 
president,  for  the  building  and  equipment  of  the  first  Pacific  Railway, 
beginning  with  lines  from  Leavenworth  and  Kansas  City  to  Lawrence,  and 
thence  extending  west.  This  was  termed  the  Kansas  Pacific  Railway, 
Eastern  Division.  In  the  third  year  of  the  war  Hallett,  without  a  cent, 
made  the  roadbed  and  obtained  the  iron  for  the  first  eighty  miles  of  this, 
literally,  the  first  Pacific  railway.  Capital  was  coming  to  his  aid,  and  he 
saw  fortune  and  an  honorable  fame  straight  in  sight,  when  he  was  shot  in 
the  back,  at  St.  Joseph,  by  a  dastardly  engineer  whom  he  had  been  com¬ 
pelled  to  discharge.  The  murderer  escaped  over  the  border  into  Dixie. 
Hallett ’s  line,  as  far  as  progressed,  passed  into  the  hands  of  St.  Louis 
bankers,  who  shortly  formed  an  alliance  with  Dr.  Durant — the  man  who 
was  destined  to  bring  the  Union  Pacific  Railway  to  completion. 

The  following  list  of  closing  prices  at  the  calls  on  Thursday,  April  14th, 
and  the  succeeding  Saturday  and  Monday,  shows  the  extent  of  the  setback : 


Stock. 

New  York  Central, 
Illinois  Central  Scrip, 
Hudson  River, 
Philadelphia  &  Reading, 
Galena  &  Chicago, 
Michigan  Central, 

Erie,  .... 
Fort  Wayne, 


April  14. 

April  16. 

April  18. 

143% 

138% 

131% 

149 

138 

115 

156 

141% 

124 

161% 

149% 

136 

144 

136% 

124 

157 

149 

131 

125% 

119% 

112% 

145 

142% 

106 

Harlem  stock,  in  which  Commodore  Vanderbilt  was  working  his  second 
corner,  gained  eleven  points  in  the  same  period,  closing  at  195  on  the  day 


SOME  MARKET  BATTLES  OF  THE  SIXTIES 


187 


of  the  Morse  failure.  But  Morse  and  Vanderbilt  were  very  different  men. 
The  Clearing  House  certificates,  to  which  reference  has  been  made,  reached 
a  total  of  $17,728,000;  the  last  one  was  issued  on  April  25th,  and  on 
June  13th  all  the  certificates  had  been  cancelled. 

The  direct  effect  of  Union  victories  or  reverses  on  the  speculative  mar¬ 
kets  was  illustrated  in  the  sharp,  upward  movement  of  gold,  which  helped 
to  boom  stocks  until  Mr.  Chase  took  the  extraordinary  measures  to  check 
it,  which  have  just  been  described.  This  rise  in  gold  was  coincident  with 
unpleasant  news  from  the  front.  General  Seymour  had  been  badly  beaten 
in  an  attempt  to  regain  Florida  for  the  Union,  in  February,  and  on  top  of 
this  came  the  unfortunate  Red  River  expedition  of  General  Banks,  in  March, 
and  his  defeat  by  a  Confederate  force  at  Sabine  Cross  Roads 
on  April  8th;  while  General  Grant,  just  appointed  Commander-  Unreasonable 
in-Chief  of  the  Union  armies,  had  not  started  his  aggressive  theTuns°f 
movement  in  Virginia.  Speculative  bulls  seemed  unwilling, 
indeed,  to  concede  any  possibility  of  Government  success  until  it  had  been 
proved  beyond  a  doubt.  A  prominent  journal  commented,  editorially,  on 
this  condition  in  its  issue  of  July  9,  1864,  as  follows: 


“  Successes  achieved  have  an  effect ;  successes  in  course  of  achievement 
have  none.  .  .  .  Let  us  take  the  siege  of  Vicksburg  as  an  illustration. 
The  news  that  General  Grant  had  landed  successfully  at  Grand  Gulf — which 
reached  here  May  9,  1863 — made  no  impression  on  the  gold  market.  The 
price  stood  firm  at  150.  On  May  15th  came  the  intelligence  that  the  army 
was  safely  encamped  in  the  Big  Black.  Gold  did  not  budge  a  hair’s  breadth. 
On  May  20th  news  arrived  of  the  capture  of  Jacksonville,  at  which  it  receded 
to  149%.  On  May  24th  we  had  official  intelligence  of  the  capture  of  Haines 
Bluff,  and  of  all  the  outworks  of  Vicksburg.  This  put  gold  back  only  to 
148%.  On  May  28th  news  came  that  the  city  was  completely  invested,  and 
this  sent  gold  to  143%.  ...  It  was  absolutely  certain,  to  every  military 
mind,  that  Vicksburg  must  fall.  The  enemy  could  not  possibly  relieve,  and 
it  was  known  that  the  place  had  but  limited  supplies.  Notwithstanding 
this,  gold  again  began  to  rise.  The  mere  fact  that  Grant’s  army  remained 
quiet  was  taken  as  a  proof  that  he  was  effecting  nothing.  Within  a  week  it 
was  147J4-  It  fluctuated  between  that  point  and  143  until  the  16th  of 
June,  when  the  news  came  of  Lee’s  advance  northward.  That  movement, 
formidable  as  it  was,  would  legitimately  have  increased  the  price  of  gold, 
and  yet  on  the  last  day  of  the  month  it  stood  at  147.  The  battle  of 
Gettysburg  sent  it  down  to  138 ;  the  first  reports  of  the  capture  of  Vicks¬ 
burg  to  133,  and  the  confirmatory  official  reports  to  123.  Such  was  the 
impression  made  by  the  event  when  it  was  fully  verified  that  even  as  late  as 
August  25th,  seven  weeks  after  it  had  taken  place,  gold  was  at  122.  .  .  . 
When  Grant  and  Sherman  commenced  the  great  movements  upon  Rich¬ 
mond  and  Atlanta,  in  the  first  week  of  May,  1864,  gold  was  at  172.  Now 
that  Grant  has  gained  a  position  which  gives  him  as  positive  assurance  of 
the  early  fall  of  Richmond  as  he  ever  had  of  the  early  fall  of  Vicksburg,  and 


188 


THE  NEW  YORK  STOCK  EXCHANGE 


now  that  Sherman,  too,  has  got  possession  of  the  last  stronghold  this  side 
of  Atlanta,  and  made  his  quick  capture  of  the  place  a  certainty,  gold  is  sold 
at  269.” 

It  will  be  observed,  however,  that  this  editorial  left  out  of  consideration 
all  manipulation  of  the  market.  At  the  time  when  it  appeared,  the  corner 
which  followed  the  Government’s  temporary  closing  of  the  Gold  Room,  and 
to  which  reference  has  been  made  in  a  preceding  chapter,  was  in  progress. 


jpl 

m 


MONG  the  operators  who  achieved  both  reputation  and  bankruptcy 
in  the  sixties  was  William  H.  Marston,  the  contriver  of  the  famous 
Prairie  du  Chien  corner.  Marston  was  formerly  the  cashier  of  an 
Illinois  bank.  He  was  attracted  to  this  city  by  its  alluring  promises  of 
w  h  Marston  fortune,  an^  became  a  commission  broker  in  the  Street.  His 
comes  to  New  business  prospered,  and  from  a  broker  he  developed  into  a 

York  from  speculator  of  prominence.  In  company  with  Henry  Keep,  a 

leading  director  in  the  Michigan  Southern  &  Northern  Indiana 
Railroad,  he  made  great  profits  by  bulling  the  stock  of  that  property. 
This  was  in  the  summer  of  1865.  In  the  fall  of  that  year  he  accumulated  a 
large  amount  of  Michigan  &  Prairie  du  Chien  Railroad  stock,  a  commodity 
then  known  in  Street  parlance  as  “Prairie  Dog,”  which  had  been  selling  at 
about  $60  a  share.  November  saw  an  exciting  corner  in  these  shares. 

The  Michigan  Southern  movement  had  culminated  on  October  6th, 
when  a  cash  sale  was  made  at  8414, a  rise  of  about  fifteen  points  in  less  than 
a  week.  A  break  in  gold  compelled  a  quick  unloading  by  the  Keep-Marston 
clique,  and  Michigan  Southern  fell  to  76%  on  the  following  day.  But  the 
movement  had  been  profitable.  The  manipulation  of  Prairie  Dog  followed 
hard  on  its  heels.  Marston,  it  is  said,  originally  planned  merely  to  raise 
that  stock  to  par,  but  finding  that  there  was  a  general  disposition  on  the 
part  of  the  road’s  directors  to  attack  it  he  determined  upon  a  more  aggres¬ 
sive  campaign  for  their  humiliation.  Short  sales  had  hammered  Prairie  du 
Chien  to  $57  a  share  on  October  21st.  Marston  and  his  associates  kept 
steadily  buying,  and  by  November  4th  they  had  advanced  the  price  to  96. 
The  stock  amounted  only  to  about  52,000  shares,  and  it  had  been  easily 
oversold.  The  frightened  shorts  found  it  impossible  to  cover.  Some  of 
them  obtained  private  settlements  at  once,  and  the  newspaper  press  of  the 
day  reported  that  a  single  house  had  paid  $125,000  to  escape 
its  contracts.  On  November  6th  Prairie  Dog  sold  between 
150  and  220  at  the  first  call.  Later  a  sale  was  made  at  the 
astounding  price  of  275  on  the  Exchange,  the  stock  touching  212  on  the 
Open  Board.  The  irregularity  of  the  quotations  was  one  of  the  most  start¬ 
ling  features  of  the  corner.  That  very  afternoon  Prairie  du  Chien  changed 


The  Prairie  du 
Chien  corner. 


SOME  MARKET  BATTLES  OF  THE  SIXTIES 


189 


hands  from  160  to  165 ;  yet  the  distracted  shorts  paid  200  and  225  to 
cover  their  contracts  on  the  following  day.  On  November  8th  the  stock 
fluctuated  between  120  and  185,  and  two  days  later,  the  situation  having 
been  adjusted,  it  sold  down  to  110. 

Marston  achieved  success  in  this  affair,  largely  because  a  great  deal  of 
stock  was  held  in  the  West  and  was  likely  to  stay  there.  He  took  good 
care,  in  fact,  that  it  should  do  so.  No  thrifty  business  man  or  prudent 
farmer  in  the  region  beyond  Lake  Michigan,  wrho  had  invested  his  capital  in 
the  shares  of  Prairie  Dog,  was  suffered  to  learn  of  the  extraordinary 
gymnastics  then  being  performed  in  the  East.  The  reader  will  doubtless 
regard  it  as  a  striking  coincidence  that  the  Milwaukee  Sentinel, 
in  its  New  York  dispatches  of  November  6th  and  7th,  gave  the  A  u9eful 
current  quotations  for  Prairie  du  Chien  at  80%  and  80%,  while  quotatfons7  m 
printing  the  other  stock  market  prices  correctly.  The  promo¬ 
ter  of  the  corner,  not  being  in  control  of  the  road’s  management,  had  also 
to  face  the  danger  of  a  supply  of  fresh  shares  brought  into  existence  for  his 
special  benefit.  The  Milwaukee  &  Prairie  du  Chien  had  recently  leased  the 
McGregor  Western  Railroad  Company,  and  was  authorized  to  base  an  issue 
of  new  preferred  stock  on  this  transaction.  Marston  obtained  an  injunction 
from  Judge  Sutherland,  restraining  the  directors  from  converting  this  pre¬ 
ferred  into  common  stock,  with  which  to  make  good  their  short  contracts. 
He  had  thus  provided  against  the  turning  of  either  of  his  flanks,  and  he 
reaped  the  fruits  of  victory.  One  house  openly  defaulted  on 
its  contracts,  preferring  to  fight  the  matter  in  the  courts.  Marston  victo- 
The  cornering  party,  nevertheless,  made  exceptional  profits.  I^of^hetw 
A  brilliant  coup  was  scored  in  the  unloading  of  the  road,  with 
which  they  appear  to  have  been  saddled.  Marston  succeeded  in  selling  it  to 
the  Milwaukee  &  St.  Paul  Railroad,  and  it  is  now  a  part  of  the  Chicago, 
Milwaukee  &  St.  Paul  system. 

This  corner  was  accounted  a  great  triumph  in  the  Street,  not  free  from 
a  certain  taint  of  knavery,  but  withal  a  gallantly  won  fight.  Marston 
never  won  another  like  it.  He  was  heavily  loaded  with  stock  in  January, 
1867,  when  a  bad  market  break  took  place,  and  the  vortex  of  failure 
swallowed  his  wealth  and  his  fame. 

Morse  and  Marston  were  both  operators  of  ability,  whose  talents  wrere 
nevertheless  insufficient  toward  off  disaster.  Each  of  them,  it  has  been  seen, 
fell  because  of  an  attempt  to  carry  too  heavy  a  burden.  In 
this  respect  their  career  paralleled  that  of  Addison  G.  Jerome,  The  Keep-Jerome 
Leonard  Jerome’s  brother,  who  was  famous  as  a  daring  and  contf,st  Mlchl- 

.  °  gan  Southern. 

successful  speculator  until  he  attempted,  m  1863,  to  corner 

the  stock  of  the  Michigan  Southern  &  Northern  Indiana  Railroad,  which  is 

now  a  part  of  the  Lake  Shore  &  Michigan  Southern  system,  a  prominent 


190 


THE  NEW  YORK  STOCK  EXCHANGE 


Characteristics 
of  Henry  Keep. 


Vanderbilt  property.  It  was  a  perilous  thing  in  those  days  to  essay  the 
punishment  of  a  director  who  was  attacking  the  stock  of  his  own  company. 
The  man  in  control  of  a  property’s  management  has  an  enormous  advan¬ 
tage  in  such  a  contest.  It  often  pays  him  to  utilize  it,  even  in  defiance 
of  the  law,  which,  if  he  does  not  defy,  he  usually  finds  easy  to  evade.  All 
these  things  Addison  Jerome  discovered  when  he  endeavored  to  ensnare  the 
redoubtable  Henry  Keep. 

Keep  was  possessed  of  rare  business  talent  as  well  as  speculative 
ingenuity.  He  was  a  solid  railroad  man  in  his  generation,  and  left  a 
fortune,  estimated  at  from  $5,000,000  to  $10,000,000,  wdien  he  died  at  his 
Fifth  Avenue  home  in  July,  1869.  His  reputation  was  good,  despite  the 
stock  market  incident  to  be  related  presently.  Indeed,  he  united  a  rather 
generous  disposition  with  the  current  sense  of  business  morality,  and  he 
had  his  warm  admirers.  A  few  days  after  his  death  one  of 
them  wrote  a  letter  to  the  Times  and  thus  described  the 
departed  chieftain:  “Wary,  cool,  intrepid,  and  skilful,  with 
great  pluck  and  boldness,  and  a  temperament  toward  concentration  from 
which  no  temptation  could  seduce  him,  he  weathered  many  a  gale  when 
barks,  supposed  to  be  stouter,  were  obliged  to  shorten  sail.”  Keep’s  whole 
life  certainly  showed  ability  and  boldness.  He  was  born  in  Jefferson 
County,  New  York,  in  1818,  and  when  he  was  a  small  child  his  widowed 
mother  was  forced,  by  destitution,  to  seek  the  charity  of  the  county  authori¬ 
ties.  A  short  time  later  young  Henry  was  bound  out  to  service  with  a 
farmer,  who  abused  him.  He  made  his  escape  and  sought  a  little  village 
near  Rochester,  where  he  worked  as  a  teamster.  When  the  crash  of  1837 
came  paper  money  depreciated.  He  had  saved  some  means  and  invested  in 
these  “shin-plasters”  with  profit.  Then  he  drifted  into  the  practice  of 
buying  Canada  notes  at  a  discount  and  taking  them  to  Canada  to  dispose 
of  them  at  full  value.  Eventually  he  started  a  bank  at  Watertown.  In 
1854  he  came  to  this  city,  and  his  wealth  grew  faster,  after  his  entrance  into 
Wall  Street,  than  it  had  ever  grown  before.  He  bought  large  quantities  of 
Michigan  Southern  common  stock  at  bottom  prices.  In  1861  he  was  a 
director  and  treasurer  of  the  road,  and  he  still  held  those  positions  in  the 
summer  of  1863. 

Addison  G.  Jerome  at  this  time  began  buying  Michigan  Southern. 
Having  perceived  that  Cornelius  Vanderbilt  already  controlled  the  Harlem 
The  Michigan  ^  Hudson  River  systems,  and  was  quietly  absorbing  an  inter- 
Southern  an  est  in  New  York  Central,  he  concluded  that  the  Commodore 
would  eventually  control  the  route  to  Buffalo,  and  would  want 
the  Michigan  Southern  &  Northern  Indiana,  which  ran  from 
Toledo,  Ohio,  to  Chicago.  Vanderbilt  got  control  of  that  road,  and  in  1869 
welded  it  (together  with  three  other  roads  which  connected  Buffalo  with 


important 
traffic  link. 


SOME  MARKET  BATTLES  OF  THE  SIXTIES 


191 


Toledo)  into  the  new  Lake  Shore  &  Michigan  Southern,  making  Horace 
F.  Clark  first  president  of  the  consolidated  company.  Whether  he  was 
backing  J  erome  in  the  summer  of  1863  it  is  difficult  to  determine.  They 
are  said  to  have  had  a  “tacit  agreement.”  If  so,  the  Commodore  certainly 
failed  to  save  his  confederate  from  ruin.  The  stock  which  had  sold  as  low 
as  $5  a  share,  when  Keep  took  hold  of  it  about  three  years  before,  stood 
at  81  on  July  25, 1863.  Urged  by  Jerome’s  steady  buying,  it  had  risen,  on 
August  5th,  to  103.  Keep  and  his  associates  not  only  were  tempted  by  the 
high  prices  to  unload,  but  began  to  go  heavily  short  of  the  stock.  The 
advancing  movement  continued,  although  the  shares  were  freely  supplied, 
and,  on  August  17th,  Michigan  Southern  touched  113,  the  highest  price 
thus  far  in  its  history.  At  this  juncture  Jerome,  who  believed  that  he  had 
bought  practically  all  the  cash  stock  available,  and  that  the  shorts  were  at 
his  mercy,  perceived,  with  uneasiness,  a  certain  degree  of  weakness  in  the 
security.  Certificates  which  could  not  possibly  exist  were  being  shoved  by 
messenger  lads  through  the  delivery  windows  of  his  office.  He  was  positive 
that  the  Street  could  get  no  more  Michigan  Southern,  and  yet  he  was  called 
upon,  with  bewildering  rapidity,  to  pay  for  shares  of  that  stock  which  he 
had  never  loaned  out.  The  market  likewise  began  to  sag,  as  if  responding 
to  the  presence  of  some  new  and  unexpected  weight.  By  Mr  Jerome 
August  19th  Michigan  Southern  common  had  fallen  to  106%.  findS  ominoua 
At  the  end  of  that  month  one  of  the  newspapers  printed  the  symptoms  of 
rumor  that  the  party  seeking  control  of  the  common  stock 
intended  immediately  to  oust  the  directors,  under  the  authority  of  a  certain 
clause  in  the  charter,  and  then  to  effect  a  beneficial  arrangement  with 
competing  roads.  The  resourceful  Mr.  Keep,  reading  this  ingenious  para¬ 
graph,  may  have  permitted  a  smile  to  relax  his  features — perhaps  may 
have  murmured,  below  his  breath,  “First  catch  your  hare.” 

On  September  3d  there  occurred  a  flurry,  of  the  sort  that  a  newcomer  in 
the  Street  is  likely  to  designate  a  panic.  The  leading  stocks  dropped  from 
three  to  eight  points  at  the  morning  call.  Michigan  Southern,  which  closed 
at  104%  on  the  previous  day,  closed  that  afternoon  at  88,  and  the  sixteen- 
point  drop  assured  the  ruin  of  Addison  Jerome.  He  was  obliged  to  unload 
his  shares  at  a  cruel  loss.  The  stock  was  forced  five  points  higher  within 
the  next  few  weeks,  either  by  short  covering  or  by  Jerome’s  last  desperate 
effort  to  fight  his  way  out  of  the  slough.  On  September  26th  Hig  defeat 
it  opened  at  79,  and  the  Street  knew  that  the  battle  was  over,  effected  by  a  new 
The  public  prints  had  begun  to  disclose  the  cause  of  the  issue  of  Michigan 
mysterious  weakness  in  Michigan  Southern.  It  was  due  to 
the  simple  fact  that  the  directors  had  issued  15,000  fresh  shares,  swelling 
the  total  capital  from  about  $9,000,000  to  $10,500,000.  At  the  office  of 
the  road  it  was  explained  that  the  charter  permitted  such  action,  and  a 


192 


THE  NEW  YORK  STOCK  EXCHANGE 


provision  of  the  original  act  of  incorporation  declared  that  the  debt  of  the 
company  should  never  exceed  its  capital  stock.  Obviously,  this  imposed 
upon  conscientious  directors  the  duty  of  counterbalancing  the  debt  by  fresh 
issues  of  stock,  whenever  practicable.  Accordingly  15,000  new  shares  had 
been  sold  in  August  at  not  less  than  $108  a  share,  and  with  the  proceeds 
second  mortgage  bonds,  to  the  amount  of  $1,500,000,  had  been  purchased  at 
a  price  not  exceeding  $108,  and  cancelled.  Who  would  have  the  audacity  to 
criticise  a  directorate  thus  zealous  to  safeguard  the  interests  of  the  property? 

The  plain  fact  was  that  Henry  Keep  had  wriggled  out  of  the  corner  by 
an  arbitrary  inflation  of  his  company’s  stock,  replacing  a  debt  on  which 
the  road  had  to  pay  seven  per  cent,  a  year,  by  an  increase  in  a  species  of 
obligation,  on  which  it  was  paying  nine.  The  Herald  declared 
How  Mr.  Keep’s  that  many  members  of  the  Exchange,  “  regarded  it  as  a  stock- 
regardej1"6  ^a8  jobbing  trick — not  illegal,  and  not  calculated  to  impair  the 
permanent  value  of  the  stock,  but  still  deserving  of  reproba¬ 
tion  as  underhand,  unfair,  and  surreptitious.”  The  Board  ordered  an 
investigation  of  the  matter,  but  apparently  no  drastic  action  was  taken. 

Addison  Jerome  never  recovered  from  this  misfortune.  He  died  a  few 
years  afterward.  Mr.  Keep  continued  to  prosper.  In  October,  1867,  he 
formed  a  pool  to  purchase  control  of  the  Chicago  &  North-Western  Rail¬ 
way,  and  enlisted  the  services  of  Rufus  Hatch,  a  prominent  broker.  His 
clique  carried  the  common  stock  from  42%,  the  low  price  in  that  month,  to 
72  in  June,  1868,  when  Keep  became  president  of  the  road,  an  office  he  held 
until  his  death.  In  October,  1868,  it  sold  at  97%.  The  preferred  was 
advanced  from  65  in  October,  1867,  to  84  in  the  following  June.  Out  of  a 
total  capitalization  of  less  than  $31,000,000  the  clique  was  found  to  pos¬ 
sess  stock  to  the  par  value  of  $25,000,000,  of  which  the  new  president  per¬ 
sonally  owned  15,000  shares.  The  Stock  Exchange  made  an  early  adjourn¬ 
ment  on  July  31, 1869,  the  day  after  his  death,  as  a  token  of  respect. 


OR  a  time,  at  least,  Leonard  W.  Jerome,  the  brother  of  Addison, 
and  father  of  the  present  Mrs.  Cornwallis  West,  was  numbered 
among  the  chieftains  of  Wall  Street.  The  prestige  which  he  derived 
from  his  speculative  triumphs  was  enhanced  by  his  activity  as  a  supporter 
of  the  Union  cause  and  by  the  fact  that  he  was  one  of  the 

CfircGr  o  j 

Leonard  w  principal  owners  of  the  New  York  Times.  Stories  of  his  ready 
Jerome,  and  an  wit  and  daring  lingered  in  the  Street  for  years  after  he  had 

in^hls  in^enmit s^ia^en  dust  from  his  feet.  It  is  related  of  Leonard  W.  Jerome 
mg  it-  mgenm  }  ^}ia^  pe  once  extricated  himself  from  an  embarrassing  plight 

solely  by  reason  of  his  knowledge  of  human  weakness.  He  was  carrying 
at  the  time  a  heavy  load  of  Michigan  Southern  and  wondering  to  whose 


SOME  MARKET  BATTLES  OF  THE  SIXTIES 


193 


LEONARD  W.  JEROME. 


shoulders  he  could  shift  the  burden.  He  chanced  to  meet  an  old  Rochester 
acquaintance  who  had  just  started  a  brokerage  business,  and  begged  the 
great  operator  for  some  orders.  Jerome  saw  his  opportunity.  At  first  he 
refused,  on  the  ground  that  his  friend  could  not  keep  a  secret.  The  friend 
swore  eternal  fidelity  and  received  an  order  to  buy  5,000  shares  of  Michigan 

Southern.  Furthermore,  he  took  pains  to  buy 
some  for  himself,  and  to  spread  broadcast  the 
rumor  that  Jerome  was  buying  the  stock  and 
it  was  sure  of  a  great  rise.  The  Street  swallowed 
the  bait  and  relieved  the  amiable  Leonard  of 
his  burden.  His  new  broker  went  to  the  wall 
in  the  slump  that  followed,  and  then  humbly 
listened  to  some  sage  advice  upon  the  evils  of 
speculation. 

The  movement  which  resulted  in  Leonard  W. 
Jerome’s  most  serious  reverse  reached  a  culmi¬ 
nation  in  February,  1867.  For  some  months 
he  had  been  bulling  Pacific  Mail,  in  the  face  of 
adverse  market  conditions  that  were  really 
initiated  in  the  previous  autumn. 

The  Treasury  Department  called  upon  the  country  banks  which  were 
public  depositories  to  transfer  the  Government  funds  to  the  Sub-Treasury, 
Secretary  McCulloch  having  decided  to  accumulate  a  large  paper-money 
balance.  The  country  banks  thereupon  drew  upon  the  city  banks  for  their 
deposits,  and  this  brought  on  a  period  of  tight  money  in  November,  1866. 
The  bears  increased  the  trouble  by  hoarding  legal  tenders  and 
conniving  with  friendly  bank  officials  to  secure  the  imposition  “ 

of  high  rates  on  loans.  The  New  York  Sub-Treasury  also 
sold  gold,  and  the  metal  dropped  nearly  two  points  on  November  21st.  On 
the  two  succeeding  days  the  market  was  much  in  need  of  a  physician. 
Between  the  20th  and  23d  Erie  lost  nearly  eight  points  and  Chicago  & 
North-Western  twelve  and  a  half.  The  following  month  saw  a  vigorous 
manipulation  of  Cumberland  Coal,  which  was  carried  through  to  J anuary 
22,  1867,  when  the  clique  broke  down,  the  price  of  the  stock  (which  had 
been  put  up  to  94  early  in  that  month)  dropping  from  84  to  54.  The 
following  day  the  failure  of  Quigley  Brothers  was  announced.  Tragic  death  o{ 
Two  days  later  A.  J.  Meyer  &  Co.  went  under.  This  house  had  the  president  of 
maintained,  at  times,  a  balance  of  $3,000,000  at  the  Bank  the  Bank  of 
of  North  America.  Mr.  Yelverton,  president  of  that  institu-  North  Amenca- 
tion,  had  been  overcertifying  their  checks,  according  to  the  common, 
though  illegal,  usage  of  Wall  Street.  He  learned  that  the  firm,  just  prior  to 
the  bankruptcy,  had  overdrawn  their  account  by  $219,000.  This  intelli- 


194 


THE  NEW  YORK  STOCK  EXCHANGE 


meeting  defeats 
Jerome. 


gence  killed  him  as  quickly  as  if  it  had  been  a  bullet  through  his  brain.  A 
heavy  crash  in  the  general  list  was  coincident  with  these  misfortunes. 

Mr.  Leonard  W.  Jerome  had,  meanwhile,  been  steadily  buying  Pacific 
Mail,  with  which  he  had  been  more  or  less  identified  for  several  years.  By 
February  he  had  put  it  up  as  far  as  possible,  and  for  the  first  week  of  that 
month  it  was  fairly  steady.  On  February  9th  it  closed  at  160.  Jerome 
had  been  depending  upon  a  favorable  directors’ 
meeting  and  the  declaration  of  a  good  dividend 
for  the  successful  completion  of  his  plan.  The 
directors  astonished  him  by  cutting 
a  dividend  the  dividend  to  three  per  cent.,  and 
the  stock  began  to  decline.  The 
celebrated  operator  sacrificed  his 
holdings  of  many  other  shares  to  prevent  defeat 
on  Pacific  Mail,  but  he  was  fighting  a  terrific 
bear  attack.  On  February  19th  the  stock  sold 
at  15314-  The  next  day  it  closed  at  138,  and  on 
February  21st  it  fell  eight  points  lower  in  the 
course  of  heavy  trading.  Jerome  wTas  thoroughly 
worsted.  His  loss  on  this  stock  alone  was  com¬ 
puted  at  $800,000,  and  it  was  never  fully  re¬ 
couped.  He  left  the  Street  a  few  years  later  with 
diminished  glory  but  a  substantial  remnant  of 
fortune. 

Both  Jerome  and  his  partner,  the  shrewd,  witty,  and  admired  William 
R.  Travers,  were  men  of  wide  social  prominence  and  possessed  of  a  fondness 
for  manly  sports.  They  were  leaders  in  club  life  and  pleasure-loving  society, 
as  familiar  to  yachtsmen  and  followers  of  the  turf  as  to  the  bulls  and  bears 
of  their  generation. 


WILLIAM  R.  TRAVER8. 


NE  magnificent  achievement  of  the  sixties— greatly  in  contrast  to 
the  speculative  encounters  that  made  these  years  memorable  in 
finance — demands  attention,  not  merely  through  its  general  com¬ 
mercial  importance,  but  also  because  it  vitally  concerned  the  stock  market. 
This  feat,  the  laying  of  the  first  Atlantic  cable,  was  the  chief  triumph  in  the 
life  of  a  remarkable  man,  Cyrus  W.  Field.  Both  the  concep¬ 
tion  and  the  execution  were  his,  and  his  only.  Nothing  but 
indomitable  enthusiasm,  pluck,  and  patience  could  have  carried 
the  project  through  to  success.  It  was  born  in  Mr.  Field’s  brain  as  early 
as  1854.  He  succeeded  at  once  in  enlisting  Peter  Cooper,  Moses  Taylor, 
Marshall  O.  Roberts,  and  Wilson  G.  Hunt  in  the  enterprise,  and  in  March  of 


The  first 
Atlantic  cable. 


SOME  MARKET  BATTLES  OF  THE  SIXTIES 


195 


that  year  these  gentlemen  obtained  the  charter  of  the  Newfoundland  Electric 
Telegraph  Company,  which  gave  them  the  right  to  lay  the  shore  end  of  any 
cable  in  Newfoundland.  The  first  attempt  to  lay  the  Atlantic  cable  was 
made  in  the  summer  of  1857,  and  resulted  in  a  breakage  360  miles  out  from 
Ireland.  In  the  financial  storm  of  1857  Mr.  Field  became  a  bankrupt.  He 
regained  his  feet,  and  his  friends  stood  by  him.  In  1858,  new  capital  having 
been  subscribed  in  this  country  and  Great  Britain,  a  new  cable  was  laid 
between  Yalentia,  Ireland,  and  Trinity  Bay,  Newfoundland.  The  news  that 
two  continents  had  been  connected  by  wire  set  all  civilization  rejoicing,  but 
the  general  happiness  was  suddenly  spoiled  by  the  parting  of  the  cable. 
In  1865  Mr.  Field,  by  heroic  persistence,  had  set  the  enterprise  in  motion 
again.  Another  cable  was  taken  out  and  lost  in  mid-ocean.  But  in  the 
following  summer  he  succeeded  in  bringing  one  of  the  century’s  great 
triumphs  out  of  apparently  hopeless  failure.  Fresh  capital  was  procured 
and  a  new  cable  manufactured.  The  Great  Eastern  carried  it  from  Yalentia 
to  Newfoundland,  and  on  July  27, 1866,  landed  it  safely  at  Heart’s  Content, 
Trinity  Bay. 

The  cable  at  once  worked  satisfactorily,  and  is  still  in  use.  It  immensely 
quickened  commercial  intercourse  between  this  country  and  Great  Britain. 
From  the  stock  broker’s  standpoint  its  prime  value  was  in  transmitting 
instantaneous  quotations,  and  orders  to  buy  and  sell  securities,  between 
the  continents.  A  speedy  outgrowth  of  the  new  condition  was  the  arbitrage 
business,  in  which  stock  houses  with  foreign  connections  learned  to  profit 
by  the  price  differences  between  the  New  York  and  London  markets  for 
American  shares. 


XIV 


FIRST  ERIE  CONFLICTS  OF  1868 


0  other  share  issue  has  been  so  prominent  in  the  history  of 
American  speculation  as  the  stock  of  the  Erie  Railroad.  It 
will  scarcely  be  disputed  that  no  other  single  issue  has  main¬ 
tained  so  intimate  a  connection  with  manipulation  for  per¬ 
sonal  ends.  The  most  important  chapter  of  Erie’s  history 
comprises  the  conflicts  of  1868,  coincident  with  the  rise  of 
Gould  and  Fisk  to  the  first  rank  of  speculators,  and  with  the  beginning  of 
Drew’s  downward  journey.  This  struggle  has  been  graphically  described 
by  Mr.  Charles  Francis  Adams,  Jr.,1  in  essays  which  include  everything  ger¬ 
mane  to  the  story,  save  some  unimportant  details.  Space  will  permit  but 
a  bare  outline  of  the  narrative. 

The  history  of  the  “  Scarlet  Woman  of  Wall  Street,”  as  Mr.  Adams  has 
described  the  Erie,  began  in  1833,  and  two  bankruptcies  had  illuminated  it 
before  the  newly  formed  Erie  Railway  Company  took  over  the  property  in 
1862,  eleven  years  after  trains  had  been  running  between  Pierpont  and 
Dunkirk.  Intrinsically  the  Erie  possessed  merit.  It  earned  splendid  divi¬ 
dends  at  times.  Its  securities  might  to-day  be  classed  as  gilt- 
a  good  property  edged  investments  if  some  friendly  deity  could  have  averted 
custodians.  the  blows  dealt  to  it  by  one  avaricious  director  after  another, 
and  could  thus  have  saved  it  from  ruin.  The  first  of  those 
who  discovered  the  personal  advantages  in  sustaining  fiduciary  relations 
to  the  property  appears  to  have  been  Daniel  Drew.  In  the  fourteen  years 
succeeding  his  entrance  to  the  directorate,  in  1852,  he  swelled  his  fortune 
by  operations  in  Erie  stock.  In  April,  1866,  a  month  notable  for  specu¬ 
lation,  Drew  was  badly  caught  by  a  corner  in  Michigan  Southern.  The 
stock  which  sold  at  83%  on  Saturday,  March  31st,  changed  hands  at  101 
cash,  92  regular,  and 83  seller  five  days,  on  the  following  Thursday.  “Uncle 

1  Chapters  of  Erie  and  Other  Essays:  C.  F.  Adams,  Jr.,  and  H.  Adams.  New  York.  1886. 


FIRST  ERIE  CONFLICTS  OF  1868 


197 


Daniel  Drew 
frustrated  in 
an  attempt  to 
escape  payment 
of  his  losses. 


Daniel,”  wlio  was  operating  through  D.  Groesbeck  &  Co.,  his  favorite 
brokers,  astonished  the  Street  by  getting  out  an  injunction  to  restrain  the 
firm  of  Scott,  Capron  &  Co.  from  buying  in  2,800  shares  of  Michigan 
Southern,  “under  the  rule,”  on  account  of  Messrs.  Groesbeck  &  Co.  The 
venerable  bear  had  manifestly  borrowed  the  stock  of  Scott,  Capron  &  Co. 
through  his  brokers,  sold  it  short,  in  expectation  of  a  fall,  and  then 
repudiated  his  contracts  rather  than  face  a  relatively  small  loss.  Scott, 
Capron  &  Co.  had  the  right  to  buy  in  their  loaned  stock, 

“under  the  rule” ;  in  other  words,  through  the  bidding  of  the 
chairman  in  open  market,  for  the  account  of  Groesbeck  & 

Co.,  with  whom  they  had  the  transaction.  The  latter  firm 
would  be  compelled  either  to  obtain  it  at  the  figure  the  chair¬ 
man  was  obliged  to  pay,  and  deliver  it  to  Scott,  Capron  &  Co.,  or  give 
notice  of  their  bankruptcy.  Drew  attempted  to  escape  both  horns  of  the 
dilemma  by  appealing  to  the  courts — a  procedure  suggestive  of  “welch¬ 
ing,”  and  vigorously  condemned  by  the  Street.  His  injunction  was  pluckily 
defied  by  the  chairman,  who  bought  the  stock  in.  Groesbeck  &  Co.  paid  for 
it  out  of  Drew’s  means  at  their  disposal,  and  the  incident  was  closed.  Their 
client  had  evidently  been  fighting  to  save  time,  believing  that  the  stock 
would  fall.  However,  he  sustained  a  heavy  loss,  and,  naturally,  turned  to 
the  often  plundered  Erie  as  a  means  of  recouping  himself. 

Some  fifteen  months  previous  he  had  made  cash  advances  to  the  Erie 
of  $1,800,000  on  28,000  shares  of  stock,  and  of  $1,700,000  more  on  Erie 
convertible  bonds,  to  the  par  value  of  $3,000,000.  The  road  therefore 
owed  him  $3,500,000,  having  hypothecated  the  equivalent  of  58,000 
shares  of  the  stock  as  collateral.  First  converting  the  bonds, 
he  now  began  to  throw  these  shares  on  the  market  in  the 
expectation  of  a  fall.  He  was,  in  fact,  known  to  have  sold  calls 
on  a  large  amount  of  Erie  and  to  have  fulfilled  his  obligations 
with  some  of  these  new  shares.  The  stock,  which  had  sold  above  97  in 
January,  and  above  79  in  April,  was  forced  to  57%  on  May  29th,  by  its  faith¬ 
ful  friend.  In  June  Mr.  Drew  began,  it  appears,  to  buy  it  again.  By  July  11th 
it  touched  76%,  and  eight  days  later  it  broke  to  64%.  Doubtless  all  these 
fluctuations  in  price  contributed  to  the  fortune  of  the  speculative  director. 

We  may  note,  in  passing,  that  Drew’s  attack  upon  Erie  was  coincident 
with  a  crash  in  the  very  market  where  Erie  was,  later,  to  find  favor  while 
despised  at  home — namely,  Capel  Court.  The  great  London 
house  of  Overend,  Gurney  &  Co.,  a  limited  liability  concern 
with  a  nominal  capital  of  £5,000,000  and  a  paid  up  capital  of 
£1,500,000,  went  to  the  wall,  late  in  the  afternoon  of  Thurs¬ 
day,  May  10th,  owing  between  £10,000,000  and  £12,000,000.  The  follow¬ 
ing  day  was  the  British  “Black  Friday.”  Peto  &  Betts,  with  liabilities  of 


One  of  Drew’s 
remarkable 
operations  in 
Erie. 


The  British 
“Black  Friday,” 
May  11,  1866. 


198 


THE  NEW  YORK  STOCK  EXCHANGE 


£4,000,000,  the  English  Joint  Stock  Bank,  W.  Shrimpton  (a  large  railway 
contractor),  and  various  other  concerns  and  individuals,  were  engulfed  in 
ruin.  Mr.  Gladstone,  then  Chancellor  of  the  Exchequer,  announced  at  mid¬ 
night  in  the  Commons  that  the  Bank  Act  would  be  suspended,  and  the  Bank 
of  England  might  issue  an  excess  of  notes  to  relieve  the  situation.  The 
British  Government’s  decision  came  at  the  end  of  a  day  of  intense  excite¬ 
ment.  “The  doors  of  the  most  respectable  banking  houses,”  said  the 
London  Times  on  May  12th,  “were  besieged,  more,  perhaps,  by  a  mob 
actuated  by  a  strange  sympathy,  which  makes  and  keeps  a  mob  together, 
than  by  the  creditors  of  banks,  and  throngs  heaving  and  tumbling  about 
Lombard  Street  made  that  narrow  thoroughfare  impassable.”  The  steam¬ 
ship  “Cuba”  brought  the  news  of  this  disaster  to  New  York  on  Monday, 
May  21st.  Secretary  McCulloch  of  the  Treasury  had  already  instructed 
P.  M.  Myers  &  Co.  to  sell  a  large  amount  of  gold,  which  was  eagerly  taken 
for  export  to  London.  The  market  having  absorbed  all  that  the  Govern¬ 
ment  brokers  could  offer,  at  between  130  and  130%,  the  price  was  run  up  to 
132%  on  Monday,  and  before  the  week  was  out  a  price  of  141%  was  reached. 
Money  was  tight  and  the  outlook  seemed  unpleasant,  but  the  rise  in  gold 
counterbalanced  the  natural  tendency  to  weakness,  and  the  general  list  was 
steady.  The  glaring  exception  was  Erie. 


on  the  Erie 
Railroad. 


BN  the  fall  of  1867  Daniel  Drew  was  treasurer  of  Erie,  and  had  never 
settled  the  accounts  which  might  be  expected  to  grow  out  of  his 
peculiar  transactions  of  1866.  Cornelius  Vanderbilt  had  secured 
the  control  of  the  New  York  Central  Railroad.  He  already  controlled  the 
Harlem  and  Hudson  railroads,  and  resolved  to  get  so  strong  an  interest  in 
Commodore  Erie  as  ensure  the  maintenance  of  good  freight  rates.  He 
Vanderbilt’s  eye  joined  forces  with  the  party  of  John  S.  Eldridge,  president  of 
Erie.  This  party  consisted  of  a  number  of  gentlemen  con¬ 
nected  with  the  Boston,  Hartford  &  Erie  Railroad  (a  malodor¬ 
ous  New  England  enterprise),  and  all  having  axes  to  grind.  A  market 
fight  over  Erie  seemed  probable,  when  a  friendly  chat  between  two  quondam 
comrades  effected  its  postponement.  Drew  called  upon  Vanderbilt  on  the 
Sunday  preceding  the  Erie  fall  election,  and  the  Commodore  showed  him 
certain  papers  in  a  suit  about  to  be  instituted,  and  based  on  Drew’s  treat¬ 
ment  of  Erie  in  the  previous  year.  The  result  was  the  formation  of  a  fresh 
alliance.  Frank  Work,  Vanderbilt’s  nephew,  entered  the  Erie  Board,  which 
was  organized  without  Drew,  but  included  him  a  few  days  after  the  regular 
election,  one  member  resigning  to  create  the  necessary  vacancy.  A  bull 
campaign  in  Erie  followed  by  mutual  agreement,  Drew  acting  for  the  pool. 
The  movement  was  successful,  largely  because  one  member  of  the  pool 


FIRST  ERIE  CONFLICTS  OF  1868 


199 


The  Erie  alliance 
with  the  Michi¬ 
gan  Southern 
precipitates  a 
conflict  in  the 
stock  market. 


decided  to  operate  for  a  rise  on  his  own  account,  and  so  informed  “Uncle 
Daniel,”  who  was  thus  enabled  to  unload  on  his  innocent  confederate 
through  the  usual  channels. 

The  future  now  seemed  assured,  and  the  speculative  director  was 
enabled  to  reflect  on  the  good  fortune  that  was  bound  to  attend  the 
children  of  grace  in  their  pursuit  of  material  benefits.  But  a  hitch  pres¬ 
ently  arose  over  a  proposed  freight  agreement,  involving  the 
Erie  and  the  New  York  Central,  and  Vanderbilt  became  angry. 

His  wrath  was  further  inflamed  upon  the  discovery  that  the 
Erie  had  effected  an  arrangement  to  strengthen  itself  as  the 
competitor  of  Central.  The  Erie  was  a  broad-gauge  road,  its 
tracks  being  six  feet  apart.  It  could,  therefore,  accommodate 
larger  cars  than  could  the  Central,  the  gauge  of  the  latter  road  varying 
from  four  feet  six  to  four  feet  ten  inches.  The  Erie  already  had  a  connec¬ 
tion  with  Akron,  Ohio.  Its  directors  now  arranged  to  guarantee  the  bonds 
of  a  construction  company  which  should  build  a  broad-gauge  road  from 
Akron  west  to  Toledo.  At  Toledo  the  Michigan  Southern  terminated,  and 
the  directors  of  that  property  agreed  to  build  a  third  rail  thence  to 
Chicago,  by  this  means  enabling  the  running  of  broad-gauge  cars  clear 
through  to  that  terminus.  The  scheme  promised  the  Erie  a  Chicago  freight 
capacity  of  12,000,000  tons  a  year,  exceeding  by  fifty  per  cent,  the  capacity 
of  the  New  York  Central. 

Vanderbilt  conceived  it  to  be  his  plain  duty  to  “buy  up”  the  Erie 
Railroad.  He  went  into  the  market  in  February,  1868,  to  fulfil  that  duty. 
Among  those  who  sold  him  stock  was  his  old  friend,  Drew. 

The  speculative  director  had  at  this  time  two  allies  in  the  Erie  director¬ 
ate  whose  resourceful  qualities  have  probably  never  been  surpassed  in  Wall 
Street.  These  were  Jay  Gould  and  James  Fisk,  Jr.,  the  one  a 
farmer’s  son,  who  up  to  that  date  had  been,  by  turns,  a  sur-  Goald  aad  ^lsk 

,  ,  j  /  ...  , ,  as  Drew’s  allies. 

veyor,  mapmaker,  tanner,  and  manipulator  of  securities,  the 
other  an  ex-peddler,  a  man  of  pleasure  and  essentially  a  daring  gambler. 
Both  possessed  unusual  capacity,  but  Gould  was  unquestionably  the  abler 
and  Fisk  the  more  audacious  and  aggressive  of  the  two.  Gould  was  then 
about  thirty-two  years  old,  and  had  been  for  eight  or  nine  years  engaged  in 
speculation.  We  shall  see  much  more  of  him  and  of  his  associates.  For 
the  present  it  will  be  sufficient  to  note  that  they  united  with  Drew  in  the 
resolve  to  keep  Vanderbilt  out  of  the  control  of  Erie. 

In  the  reports  for  the  year  ending  September  30, 1867,  the  Erie  Rail¬ 
road’s  capitalization  was  stated  at  $16,574,300  of  common  and  $8,536,- 
910  of  preferred  stock,  a  total  of  $25,111,210.  Vanderbilt  reckoned  upon 
this  amount,  and  determined  to  close  the  source  of  further  supplies  before 
buying  control  of  the  road.  On  February  17th  and  19th  and  March  3d, 


200 


THE  NEAV  YORK  STOCK  EXCHANGE 


War  of  the 
injunctions 
begins. 


accordingly,  lie  secured  from  Justice  George  G.  Barnard  of  the  Supreme 
Court— a  Tammany  helot  numbered  among  the  Vanderbilt  properties  — 
injunctions'  restraining  the  Erie  from  paying  its  debt  to  Drew  or  from 
issuing  fresh  capital,  or  from  guaranteeing  the  bonds  of  any 
connecting  road,  and  restraining  Drew  from  any  transactions 
in  Erie  until  he  had  returned  to  the  Erie  treasury  the  58,000 
shares  hypothecated  with  him,  and  10,000  other  shares  he 
was  alleged  to  have  received  in  the  Buffalo,  Bradford  &  Pittsburg  deal. 
There  was  a  little  road  of  that  name  running  from  the  Erie  line,  at 
Carrollton,  New  York,  to  Gilesville,  Pennsylvania.  It  had  cost  about 
$250,000,  and  bonds,  to  the  par  value  of  $1,766,000,  had  been  issued 
against  it.  Drew  and  his  associates  had  gotten  hold  of  these,  leased  the 
little  road  for  about  five  centuries  to  the  Erie,  forced  the  Erie  to  guarantee 
these  choice  bonds,  and,  in  return  for  the  bonds  at  par,  had  issued  to 
themselves  fresh  Erie  stock  at  80. 

Drew  was  likewise  restrained  from  acting  as  treasurer  pending  investi¬ 
gation  of  his  conduct.  His  party  openly  responded  by  obtaining  from 
Judge  Balcom,  at  Binghamton,  an  order  suspending  Work  from  the  direc¬ 
torate,  staying  all  Barnard’s  orders  and  summoning  the 
Erie  issues  stock  litigants  to  appear,  on  March  7th,  at  Cortlandville.  But  this 
was  mere  skirmishing.  A  genuine  battle  was  in  preparation. 
The  Erie  directors  had  secretly  passed,  on  February  19th,  an 
ambiguous  resolution,  empowering  the  execu¬ 
tive  committee  to  do  practically  anything  not 
expressly  forbidden  by  the  constitution  and 
laws  of  the  State,  and  had  also  authorized  the 
issue  of  convertible  bonds  to  the  par  value  of 
$10,000,000,  to  be  sold  at  72%.  Drew  was 
restrained  at  the  time  from  dealing  in  Erie.  He 
satisfied  his  conscience  by  directing  his  broker, 

David  Groesbeck,  to  deal  for  him.  Groesbeck 
bought  half  these  bonds  at  the  figure  named, 
and  converted  them,  Drew  giving  him  a  guar¬ 
antee  against  loss  on  the  deal.  According  to  the 
sworn  testimony  of  David  Groesbeck  before  the 
Erie  Investigation  Committee  on  March  25th, 
he  delivered  49,400  of  these  shares  to  William 
Heath  &  Co.;  Smith,  Gould,  Martin  &  Co.,  and 
Robinson,  Cox  &  Co.,  at  prices  ranging  about 
60,  on  Mr.  Drew’s  order,  and  charged  his  client  with  the  loss.  Drew  had 
been  resolutely  bearing  the  stock,  and  seems  to  have  been  hard  pressed  to 
cover  his  contracts.  These  50,000  fresh  shares  found  their  way,  of  course. 


for  strategic 
purposes, 


FIRST  ERIE  CONFLICTS  OF  1868 


201 


into  Vanderbilt’s  hands.  Doubtless  he  swallowed  the  dose  before  realizing 
the  exact  nature  of  the  prescription. 

His  energetic  foe  was  devising  plans  of  even  greater  efficiency.  On 
March  3d  the  compliant  Erie  Board  voted  to  issue  at  once  the  remaining 
$5,000,000  of  convertible  bonds.  It  was  still  thought  imprudent  for  Drew 
to  deal  too  directly  in  Erie  securities,  so  Groesbeck  procured  him  a  man  of 
straw,  one  Martin  E.  Greene.  Mr.  Greene,  however,  was  handicapped  by 
a  prejudice  against  the  making  of  perjured  affidavits,  and  retired  from  the 
field.  A  more  accommodating  dummy,  Ashley  by  name,  was  found. 
Ashley,  with  Drew’s  money,  bought  the  bonds  from  the  Erie  road  at  72% ;  in 
other  words,  paying  $3,625,000  for  them,  and,  figuratively 
speaking,  handed  them  over  to  Drew,  who  thereupon  sold  An  obliging 

them  to  the  obliging  Ashley  at  77,  the  latter  giving  his  note  peoiiia^eaie 

for  the  amount  involved — $3,850,000  —  and  being  informed 
that  after  the  bonds  had  been  converted  into  stock  and  the  stock  sold  for 
his  account  he  would  receive,  as  compensation  for  his  trouble,  whatever 
profit  might  accrue  from  the  transaction.  This  he  appears  really  to  have 
believed.  The  Drew  party  went  off  with  the  bonds  and  the  note.  This  was 
on  Saturday,  March  7th,  and  on  the  day  following,  Horatio  N.  Otis, 
secretary  of  the  Erie  Company,  was  busily  engaged  in  signing  blank  certifi¬ 
cates  for  thousands  of  new  shares. 

On  Monday  morning,  March  9th,  several  strange  events  took  place. 
Mr.  Otis  ordered  a  young  employe  to  take  the  newly  signed  certificates  for 
50,000  shares  from  the  Erie  Building,  at  187  West  Street,  to  the  transfer 
office  at  11  Pine  Street.  He  had  no  sooner  appeared  outside  the  Erie  office 
doors  than  Mr.  Fisk,  mysteriously  apprised  of  the  prospective  journey, 
appeared,  snatched  the  certificate  books  and  ran  off  with  them.  Oddly 
enough,  Mr.  Fisk’s  partner,  William  Belden,  left  the  convertible  bonds,  which 
Ashley  had  “  sold  ”  to  Drew,  on  the  desk  of  Mr.  Otis  a  few  hours  later. 

Meanwhile  Uncle  Daniel’s  party  had  sought  refuge  beneath  the  judicial 
ermine  from  the  Vanderbilt  despoilers.  Early  on  Monday  they  hastened 
to  Brooklyn,  and  to  Justice^  Gilbert,  of  the  Supreme  Court,  a  respectable 
but  apparently  an  impulsive  man,  and  at  the  suit  of  Belden, 
bolstered  by  an  affidavit  to  which  Mr.  Ashley  had  affixed  his 
signature  with  no  very  clear  knowledge  of  its  contents,  they 
obtained  a  valuable  order.  Mr.  Belden  had  charged  that 
Justice  Barnard  was  engaged  in  a  stock  conspiracy  with 
Vanderbilt.  Justice  Gilbert  promptly  stayed  all  the  orders  of 
his  colleague  and  expressly  commanded  the  Erie  directors  to  exchange 
convertible  bonds  for  stock  upon  demand.  The  directors,  inspired  by  an 
admirable  spirit  of  docility,  had  virtually  obeyed  this  command  before  its 
issuance.  They  now  saw  their  conduct  vindicated.  Furthermore,  they 


The  Erie 
directors 
courageously 
range  them¬ 
selves  between 
two  fires. 


202 


THE  NEW  YORK  STOCK  EXCHANGE 


resembled  the  voter  who  accepts  bribes  from  the  political  henchmen  of  two 
opposing  parties  and  then  feels  free  to  cast  his  ballot  as  his  conscience  and 
judgment  dictate.  Since  they  were  forbidden  by  Barnard  to  convert  bonds 
into  stock,  and  forbidden  by  Gilbert  to  refuse  to  do  so,  who  but  the  most 
captious  could  blame  them  for  doing  as  they  pleased  ? 

Erie  stock  had  closed  on  Saturday  at  77%,  and  it  opened  on  this  por¬ 
tentous  Monday  at  80,  seller  thirty  days,  and  ran  briskly  up  to  82%,  at  the 
morning  call.  Vanderbilt  was  buying.  Shortly  after  the  call  it  sold  up  to 
84,  and  the  50,000  fresh  shares  in  the  hands  of  Daniel  Drew  began  to  slide 
like  an  avalanche  upon  the  startled  market.  The  Commodore  was  com¬ 
pelled  to  take  them,  for  he  was  carrying  too  heavy  a  load  to  permit  a 
serious  fall  in  the  price.  Nevertheless,  after  the  last  of  the  Drew  stock  had 
been  absorbed  at  about  75,  amid  spasms  of  excitement  that  pervaded  the 
region  of  William  Street,  the  price  descended  to  71%.  It  rose  again  with 
determined  vigor  in  the  afternoon  and  closed  at  76%  bid,  offered  at  one 
quarter.  Drew’s  great  coup  had  proved  a  success. 

Ninety  per  cent,  of  the  fresh  stock — that  is  to  say,  45,000  shares  —  had 
been  sold  through  the  firm  of  William  Heath  &  Co.  According  to  the 
The  Drew  testimony  of  William  Heath’s  partner,  James  M.  Ellis,  these 
phalanx  wins  shares  fetched  $3,594,762.50,  an  average  price  of  almost  $80 
victory  and  a  shave.  Mr.  Adams  reckons  that  the  total  profit  on  the 

divides  the  spoils,  gq  qqq  shares  was  close  to  $375,000,  which  is  based  on  an 

average  price  of  eighty  for  the  entire  amount.  At  all  events  Drew  got  half 
of  it  and  the  Fisk-Gould  party  the  other  half. 

On  the  afternoon  of  this  same  Monday  the  Erie  Board  met,  and  in  loftily 
worded  resolutions  commended  their  purity  of  purpose  to  the  world.  They 
emphatically  denounced  Frank  Work,  who  had  formerly  supported  Drew’s 
measures  and  had  now  gone  over  to  the  enemy.  “The  motive  for  this 
otherwise  unaccountable  change  of  front  on  Mr.  Work’s  part,”  they 
explained,  “is  to  be  found  in  the  well-known  fact  that  he  was  put  into  this 
Board  in  the  interest  of  the  Hudson  River  and  Central  railroads ;  and  that 
when  we  refused  to  become  parties  to  the  scheme  of  Mr.  Vanderbilt  and  his 
friends  to  create  a  gigantic  monoply  for  the  benefit  of  the  Central  line,  Mr. 

Work’s  interests  were  exposed.”  The  Board  also  referred  to 
M^work^  "the  fact  that  the  State  Senate  (which  could  hardly  be  expected 
to  overlook  so  lucrative  an  opportunity)  had  appointed  a 
committee  to  investigate  the  recent  conduct  of  the  road’s  affairs.  “  To  this 
tribunal,”  they  added,  “we  confidently  appeal.”  It  is  impossible  to  appre¬ 
ciate  the  humor  involved  in  this  expression  without  knowing  the  fact  that 
the  Board  were  already  planning  to  lay  such  financial  proposals  before  the 
“tribunal”  as  would  ensure  the  effectiveness  of  their  appeal.  For  the  pur¬ 
pose  of  keeping  down  the  price  of  Erie,  in  which  no  doubt  all  the  Drew  allies 


FIRST  ERIE  CONFLICTS  OF  1868 


203 


were  conducting  private  short  speculations,  Mr.  Fisk  the  next  day  engi¬ 
neered  a  lockup.  Through  D.  Groesbeck  &  Co.,  his  firm  deposited  several 
million  dollars  with  the  Tenth  National  Bank,  took  out  certified  checks 
against  the  amount  and  deposited  the  checks,  taking  certificates  of  deposit 
therefor.  Mr.  Dickinson,  the  bank’s  president,  was  away  at 
the  time  seeing  a  relative  off  on  a  steamer.  Upon  his  return 
he  wrote  a  letter  of  remonstrance  to  D.  Groesbeck  &  Co., 
requesting  them  to  withdraw  their  account.  It  evoked  the  following  reply 
dated  March  12th : 


Mr.  Fisk’s 
lockup. 


“  J.  B.  Dickinson,  Esq.,  Pres.  Tenth  National  Bank: 

“Sir — The  evening  papers  of  yesterday  contain  a  letter  from  you  to 
D.  Groesbeck  &  Co.,  exposing  our  private  affairs  without  justification  or 
excuse.  Your  bank  received  from  us  deposits  of  more  than  $4,000,000 
during  the  day  and  up  to  half-past  three  o’clock,  and  thereupon  certified 
checks  for  nearly  the  whole  amount.  More  checks  we  could  not  deposit  the 
same  day  and  the  next  day  we  paid  them  away  to  other  parties.  Those 
parties,  it  seems,  presented  them  to  your  bank,  where,  instead  of  paying 
them,  you  gave  your  certificates  of  deposit,  thus  making  yourselves  volun¬ 
tary  custodians  of  the  funds.  In  all  this  if  there  be  any  blame  it  is  yours. 
We  are  not  responsible  for  your  absenting  yourself  from  the  bank,  even  to 
see  a  member  of  your  family  off  on  the  steamer.  We  challenge  you  to  show 
that  we  have  had  anything  to  do  with  a  tight  money  market.  In  view  of 
these  facts  we  propose  to  close  our  account  with  you  and  we  beg  that 
you  will  have  it  written  up.  Very  respectfully, 

“Fisk,  Belden  &  Co.” 

Probably  no  fragment  of  literary  effort  was  more  characteristic  of  Fisk 
than  this  epistle,  in  which,  having  been  detected  in  a  successful  plan  to  pro¬ 
duce  a  financial  stringency,  he  assumes  the  air  of  offended  virtue,  and  with 
ironic  argument  endeavored  to  shift  the  blame  to  other  shoulders. 


N  the  night  of  Tuesday,  March  10th,  the  Erie  directors,  learning  that 
the  indignant  Barnard  had  issued  processes  of  contempt  for  them, 
fled  across  the  ferry  to  the  Erie  dock  in  Jersey  City,  taking  with 
them  the  books  and  effects  of  the  Erie  company,  and  some  $6,000,000  or 
$7,000,000  in  cash  which  Commodore  Yanderbilt  had  paid 
them  for  the  fresh  issues  of  stock.  Here  they  established  them-  ^1r^8a^e1^ 
selves  at  Taylor’s  Hotel,  dubbed  “Fort  Taylor,”  and  dwelt  in  Jersey  city, 
the  midst  of  an  armed  guard  until  the  end  of  March.  They  ^^.sTta^r” 
succeeded,  by  means  unexplained  to  the  public,  in  getting  the 
New  Jersey  Legislature  to  pass  a  law  permitting  them  to  do  business  in 
that  State.  At  times  parties  of  roughs  crossed  over  from  New  York,  in 


204 


THE  NEW  YORK  STOCK  EXCHANGE 


disgraces 
the  bench. 


order,  in  their  own  language,  to  “cop”  Mr.  Drew  and  bring  him  back  to 
justice.  These  men  were  popularly  supposed  to  be  in  Vanderbilt’s  employ, 
and  the  theory  seems  plausible,  though  Mr.  Adams  discredits  it.1  At  all 
events  the  Drew  party  succeeded  in  beating  them  off  and  so  aroused  the 
citizenry  of  Jersey  City  that  every  baker  and  bartender  carried  sidearms  in 
preparation  for  the  foe. 

Alexander  S.  Diven,  vice-president  of  the  Erie,  had  neglected  to  take 
refuge  in  flight.  On  Thursday  night  he  was  arrested  in  New  York  for  con¬ 
tempt  of  court,  and  in  the  hearing  of  his  case  before  Judge  Barnard,  which 
spread  over  a  number  of  days,  the  Tammany  solon  proffered 
Bamard  such  an  exhibition  of  himself  as  all  decent  persons  observed 

with  disgust.  The  sessions  were  like  so  many  scenes  of  opera 
bouffe,  with  a  corrupt  buffoon  masquerading  in  the  judicial 
ermine  as  star  performer.  “He  vindicated  his  purity,”  says  Mr.  Adams, 
“by  select  specimens  of  pot-house  rhetoric.”  The  eminent  counsel  for  the 
Drew  party  insulted  him  to  his  face  without  his  being  able  to  resent  the 
affront,  if  indeed  he  perceived  it.  At  one  time  the  Judge  vociferously 
declared  that  he  had  personally  employed  detectives  in  the  case.  “In 
this  wide  city  of  1,000,000  or  1,500,000  of  inhabitants,”  he  exclaimed, 
“where  a  man  can  be  hired  for  $5  to  swear  any  man’s  life  away,  there  is 
not  one  so  base  as  to  come  upon  this  stand  and  swrear  that  I  had  anything 
to  do  with  any  conspiracy.”  Occasionally  his  emotion  reduced  him  to 
tears.  He  displayed  his  dignity  in  one  instance  as  follows :  “In  this  pro¬ 
ceeding  I  shall  say  to  the  counsel  that  if  they  have  said  anything  wrong  the 
Court  rebukes  them.”  Judge  Gilbert,  on  March  18th,  denied  the  continu¬ 
ance  of  the  orders  he  originally  granted  to  the  Drew  party,  but  they 
obtained  certain  fresh  orders  from  Judge  Clarke  and  served  them  on 


Barnard.  He  promptly  vacated  these  and  appointed  Vanderbilt’s  son-in- 
law,  George  A.  Osgood,  receiver  of  the  proceeds  of  the  110,000,000  of  Erie 
convertible  bonds  which  had  been  sold.  Another  Judge  enjoined  Osgood 
from  acting.  He  resigned,  and  Barnard  appointed  Peter  B.  Sweeny,  the 
notorious  Tammany  leader,  in  his  stead.  Mr.  Sweeny  never 
Usefulness  of  the  HicI  anything  as  receiver,  yet  his  labors  were  crowned  by  an 
cOTmection!Cal  award  of  |150,000,  made  by  Judge  Barnard,  out  of  the  Erie 
funds.  On  a  later  occasion  Horace  F.  Clark,  one  of  the 
Vanderbilt  counsel,  was  reading  aloud  a  portion  of  the  Belden  complaint, 
and  came  to  the  section  attacking  Judge  Barnard.  “Hold  on,  Mr.  Clark,” 
shouted  the  outraged  Justice;  “Leave  me  out.  Leave  Mr.  Barnard  out.” 

The  squabbles  of  opposing  counsel  and  the  frequent  bandying  about 
of  allegations  of  fraud  heightened  the  disgraceful  character  of  these 


1  It  is  interesting  to  note  that  the  leader  of  one  of  these  gangs  was  traced  to  Judge  Barnard’s  dwelling, 
In  this  city. 


FIRST  ERIE  CONFLICTS  OF  1868 


205 


proceedings.  At  times  they  were  irradiated  by  touches  of  humor.  Mr. 
Greene,  the  dummy  whom  Mr.  Groesbeck  first  procured  for  Drew,  was  on 
the  stand  on  April  21st,  and  this  bit  of  testimony  ensued : 

Mr.  Greene — “Mr.  Groesbeck  said  Mr.  Drew  wanted  to  sell  me  $5,000,000 
wrorth  of  the  convertible  bonds  of  the  Erie  Railway  Company,  holding  me 
harmless  of  all  loss  in  the  transaction.”  [A  pause.] 

Mr.  Clark  —  “Go  on,  sir.” 

Mr.  Greene — “I  have  not  the  full  scope  of  the  question.  I  should  very 
much  prefer  it  if  your  question  were  specific  and  not  so  comprehensive,  sir.” 

But  the  real  scene  of  battle  had,  long  before  this,  shifted  to  Albany. 
The  Erie  directors,  having  saddled  Vanderbilt  with  a  tremendous  load  of 
rubbish,  having  endeavored  to  terrify  him  by  reducing  the  fare  from  New 
York  to  Buffalo  from  $10  to  $7,  and  having  observed  with  satisfaction  a 
growing  weakness  in  the  Erie  stock,  now  determined  to  get  legislative 
sanction  for  their  actions.  Senators  Pierce,  Humphrey,  Chapman,  Bradley, 
and  Mattoon  had  been  chosen  to  serve  on  the  Investigating 
Committee,  which  began  its  sittings  on  March  10th.  Mattoon  Erie  directorate 
had  already  made  frequent  visits  to  the  Erie  office  in  New  cation  ol  i&w!~ 
York.  He  was  believed  to  endorse  the  Erie  directors’  view  of 
the  situation.  However,  they  had  not  paid  quite  enough  to  hold  him. 
After  various  sessions  of  the  committee,  two  reports  were  drawn,  one  of 
them  exonerating  the  Drew  party,  and  signed  by  Senators  Chapman  and 
Humphrey,  the  other  condemning  them,  and  signed  by  Senators  Pierce  and 
Bradley.  Whichever  report  Mattoon  decided  to  sign  would  be  that  of  the 
majority.  On  March  31st  he  agreed  to  stand  with  the  Erie  Board.  On  the 
following  day,  having  been  reached  by  some  mysterious  influence,  he  signed 
the  hostile  report.  Mr.  Gould  declared  himself  “astonished.” 

This  was  a  minor  matter,  after  all.  It  was  of  some  comfort  to 
Vanderbilt,  then  making  a  fight  against  tremendous  obstacles,  but  of  little 
material  advantage.  The  actual  battle  began  over  a  bill  introduced  in  the 
Assembly  by  Mr.  Bristol,  of  Wyoming,  on  behalf  of  the  Erie  directors,  con¬ 
cerning  which  the  New  York  Herald  said : 

“It  came  as  a  godsend  to  the  hungry  legislators  and  lobby  men,  who 
have  had  up  to  this  time  such  a  beggarly  session  that  their  board  bills  and 
whiskey  bills  are  all  in  arrears  and  their  washerwomen  and  bootblacks  are 
becoming  insubordinate.” 

The  bill  in  question  legalized  the  issuing  of  Erie  convertible  bonds,  and 
the  guaranteeing  by  the  Erie  of  the  bonds  of  any  other  railroad  company 
with  whose  line  it  connected.  It  empowered  the  Erie  directors  to  contract 
with  the  Michigan  Southern  for  their  broad-gauge  connection  to  Chicago, 
and  set  the  stamp  of  official  sanction  upon  their  previous  issue  of  bonds 


206 


THE  NEW  YORK  STOCK  EXCHANGE 


and  stocks.  A  hearing  upon  it  was  held  on  March  20th,  when  Horace  F. 
Clark,  Chauncey  M.  Depew,  former  Governor  S.  E.  Church,  and  the  eminent 
lawyer,  Charles  O’Conor,  appeared  at  Albany,  on  Vanderbilt’s  behalf,  to 
oppose  it.  John  Ganson  spoke  on  behalf  of  the  Erie  directors.  He 
explained  that  the  road’s  total  outstanding  stock  had  a  par  value  of 
124,265,000,  and  that  stock  to  the  further  amount  of  $8,750,000  should 
be  issued  to  supply  the  property’s  needs.  He  was  proceeding  to  explain 
how  the  money  would  be  used,  when  Mr.  Church  remarked :  “  There  won’t 
be  so  much  money  left  when  Mr.  Drew  gets  through  with  his  speculations.” 

Mr.  Clark  declared  that  his  associates  and  he  represented  a 
Vanderbilt  majority  of  the  Erie  stock  and  opposed  the  bill.  Vanderbilt’s 
at° Albany 1Umph  influence  was  powerful  with  the  Democratic  party,  which  was 
then  in  the  saddle  at  Albany,  and  he  had  other  means  of 
swaying  the  Railroad  Committee.  On  March  27th  they  reported  unfavor¬ 
ably  upon  the  measure,  and  the  Assembly  sustained  their  report.  Published 
rumor  at  the  time  declared  that  the  Drew  men  had  been  offering  $1,000 
a  vote,  and  only  half  of  it  down.  These  terms  were  spurned  by  the  lofty- 
minded  Assemblymen  until  rumors  of  a  compromise  were  spread.  They 
then  recalled  that  a  recent  paragraph  in  an  Albany  newspaper  had  esti¬ 
mated  Vanderbilt’s  fortune  at  $70,000,000  and  Drew’s  at  a  paltry 
$15,000,000.  They  must  not  be  too  hard  on  Drew.  They  hastened  to 
exhibit  their  mollified  views  to  the  lobbyists,  and  found  that  the  golden 
hour  had  flown.  The  Drew  cohorts  had  departed.  The  bill  was  dead.  But 
the  retreat  was  merely  a  manoeuvre.  Undismayed  by  the  Assembly’s  vote, 
the  formidable  threats  of  Judge  Barnard,  or  the  attitude  of  the  New  York 
press,  which  almost  without  exception  supported  Vanderbilt,  the  Drew 
army  prepared  anew  for  battle.  The  genius  of  Mr.  Gould  was  called  into 
play.  He  gave  out  the  interesting  news  that  he  was  off  for 
Mr.  Gould  Ohio,  stole  quietly  away  from  Jersey  City,  and  on  Monday, 
March  30th,  arrived  at  Albany,  where  a  new  bill  in  the  interest 
of  his  party  had  been  introduced  in  the  Senate.  The  next  day 
he  was  arrested  by  the  Sheriff  of  Albany  County,  bailed  out  and  compelled 
to  return  on  Saturday  to  New  York  and  appear  before  Barnard  to  face  con¬ 
tempt  charges.  After  answering  some  questions  he  was  enabled  to  go  back 
to  Albany  in  charge  of  a  deputy  sheriff.  At  Albany  he  was  conveniently 
taken  ill  and  induced  the  official  to  depart  for  New  York  and  report  him  a 
runaway.  This  defiance  of  justice  never  cost  Mr.  Gould  any  real  trouble,  the 
slate  being  wiped  clean,  with  the  aid  of  some  affidavits,  at  the  proper  time. 

While  at  the  State  capital,  Mr.  Gould  entrenched  himself  in  a  prominent 
hotel,  and  undertook  to  imbue  the  minds  of  the  Legislature  with  the 
validity  of  the  Erie  directors’  views.  His  mission  was  aided  oddly  enough 
by  a  fiasco,  due  to  the  gullibility  of  one  aged  and  honest  Assemblyman, 


prepares  to 
offset  it. 


FIRST  ERIE  CONFLICTS  OF  1868 


207 


Elijah  M.  K.  Glen,  of  Wayne  County,  who  arose  excitedly  in  his  place,  on 
April  1st,  and  declared  that  the  Erie  Railroad  report  had  been  bought,  and 
that  he  had  personally  received  an  offer  of  $500  for  his  vote.  He  presented 
a  paper,  in  which  he  charged  “corruption,  deep,  dark,  and 
damning,  on  a  portion  of  this  house.”  It  developed  that  he  An  unfortunate 
had  been  made  a  victim  of  an  April  Fool’s  Day  joke,  and  that  Day^t0' S 
his  charge  grew  out  of  a  conversation  with  an  itinerant  Jewish 
peddler,  named  Lewis,  who  used  to  frequent  the  legislative  gallery.  The 
blacklegs  of  the  Assembly  passed  a  vote  of  censure  upon  their  unfortunate 
old  colleague,  and  he,  naturally,  resigned.  They  doubtless  believed  that,  by 
adding  hypocrisy  to  their  customary  practices  of  crime,  they  might  vindi¬ 
cate  themselves  in  the  public  eye.  Certain  it  is,  that  the  episode  made 
current  charges  of  bribery  seem  ludicrous. 

The  Senate  bill  legalized  all  the  Erie  bond  issues,  but  made  it  a  felony 
to  use  the  proceeds  for  completing  or  furthering  the  road.  It  had  been 
aptly  described  by  Judge  Barnard  as  resembling  a  measure  to  legalize 
counterfeit  money.  At  all  events,  it  became  evident  that  the  bill  was  going 
through.  On  Sunday,  April  19th,  Drew  called  on  Vanderbilt  at  the  Man¬ 
hattan  Club,  in  New  York,  and  a  compromise  was  effected,  ending  the  long 
war.  The  news  reached  Gould  in  a  dispatch  on  Monday  morning,  when  it 
was  too  late  for  even  his  genius  to  be  of  avail.  The  Albany  correspondent 
of  the  New  York  Herald  wrote :  “  It  is  said  that  prices  came  down  wonder¬ 
fully.  Those  who  had  been  demanding  $5,000  were  willing  to  take 
anything  not  less  than  $100.  The  great  Erie  coffers  were  closed,  how¬ 
ever.  .  .  .  The  utmost  excitement  continued  till  11  o’clock.  The  curses 
against  Vanderbilt  were  loud  and  deep.  His  treachery  or  cowardice  had 
cheated  the  ring  out  of  thousands,  nay  hundreds  of  thousands,  of  dollars.” 

All  opposition  was  withdrawn  and  the  bill  went  through  by  tremendous 
majorities  that  day.  The  infuriated  Legislature  hunted  up  sundry 
unpleasant  railroad  measures  and  rushed  them  through  simply  to  hamper 
the  Commodore.  But  their  grievance  was  great.  Their  revenge  was 
pitifully  small. 


8T  is  a  curious  fact  that  Vanderbilt’s  attorneys  appeared  before 
Governor  Fenton  the  next  day,  either  for  form’s  sake,  or  because 
the  Commodore  had  omitted  to  tell  them  of  the  compromise,  and 
made  a  futile  appeal  to  him  not  to  sign  the  bill.  Peace  was 
not  formally  proclaimed  till  July,  but  the  Erie  leaders  left 
“Fort  Taylor”  on  April  25th,  and  Barnard  permitted  them 
easily  to  purge  themselves  of  contempt.  The  agreement  which  ended  the 
conflict  was  to  this  effect :  Vanderbilt  was  relieved  of  50,000  shares  of  Erie 


Details  of  the 
compromise. 


208 


THE  NEW  YORK  STOCK  EXCHANGE 


at  70,  the  road  giving  him,  in  payment,  cash  to  the  amount  of  $2,500,000, 
and  Boston,  Hartford  &  Erie  bonds  to  the  par  value  of  $1,250,000, 
assumed  to  be  worth  $1,000,000.  In  addition,  he  got  $1,000,000  in  cash, 
ostensibly  for  allowing  the  Erie  Railroad  the  privilege  of  calling  on  him  for 
his  remaining  50,000  shares  at  70  within  the  next  four  months.  Two  seats 
in  the  Erie  Board  were  allotted  to  him.  The  Eldridge  party  received  its 
sop  in  the  permission  to  unload  on  the  Erie,  at  80,  Boston,  Hartford  &  Erie 
bonds  to  the  par  value  of  $5,000,000.  It  was  out  of  these  bonds,  it  will  be 
noticed,  that  Vanderbilt  was  partially  paid.  Of  the  extra  $1,000,000  in 
cash,  paid  to  him  for  the  “call,”  Drew  contributed  $540,000,  in  considera¬ 
tion  of  a  quit  claim  on  all  that  he  owed  to  the  Erie.  The  railroad’s  coffers 
supplied  the  balance  of  this  $1,000,000,  and  also  the  sum  of  $429,250,  to 
soothe  the  feelings  of  Frank  Work  and  Richard  Schell  and  to  pay  counsel 
fees.  In  short,  the  former  foes  effected  their  reconciliation  at  the  expense 
of  the  Erie  shareholders. 

The  road  itself,  by  some  piece  of  strategy  not  quite  intelligible,  fell  into 
the  hands  of  Messrs.  Fisk  and  Gould,  who  were  now  allied  with  the  Tweed 
Tammany  ring.  It  was  at  this  juncture  that  their  joint  career  of  power 
had  its  real  beginning.  Among  its  first  fruits,  we  shall  see,  was  the  utter 
rout  of  the  resourceful  Daniel  Drew. 


XV 


ERIE  UNDER  THE  NEW  CONTROL 


HE  rise  of  Jay  Gould  and  his  associate,  Fisk,  to  the  control  of 
the  Erie  Railroad,  and  their  affiliation  with  the  political 
organization  under  Tweed’s  control,  endowed  them  with 
extraordinary  power  and  led  the  way  to  the  gold  corner  of 
the  following  year.  Their  first  triumph  was  in  repelling  an 
attack  on  the  part  of  Drew.  It  will  serve  us  as  an  excellent 
illustration  of  the  dashing  methods  of  a  new  regime. 

Mr.  Gould  took  the  presidency  of  Erie  shortly  after  the  compromise 
already  described  had  been  carried  into  effect.  On  October  13,  1868,  he 
was  reelected,  William  M.  Tweed  and  Peter  B.  Sweeny  cementing  the  Tam¬ 
many  alliance  by  entering  the  Erie  directorate.  The  property,  exploited  as 
it  had  been,  still  presented  the  assurance  of  profit  to  those  in  control.  This 
profit,  as  it  happened,  was  largely  to  be  made  out  of  our  English  cousins, 
who  conceived  an  enthusiastic  belief  in  the  value  of  Erie  shares, 
and  bought  them — save  the  mark ! — for  investment.  We  may  English  investors 
well  imagine  that  Messrs.  Fisk  and  Gould  indorsed  from  the  fondnese 
heart  the  opinion,  less  popular  in  their  day  than  ours,  that 
Great  Britain  was  our  natural  friend,  and  made  references  to  “  hands  across 
the  sea  ”  in  their  conversation  with  tourists  from  Albion.  As  for  their  polit¬ 
ical  connections,  these  must  not  be  thought  traceable  to  any  prejudice  in 
favor  of  one  or  another  set  of  political  principles.  Mr.  Gould  described  him¬ 
self  as  a  Republican  in  Republican  districts,  a  Democrat  in  Democratic  dis¬ 
tricts,  and  an  Erie  man  all  the  time.  New  York  was  then  a  Democratic 
district.  The  local  Democratic  organization  controlled  some  very  available 
judges. 

Gould  and  Fisk  united  in  purchasing  the  Opera  House,  at  the  northwest 
corner  of  Eighth  Avenue  and  Twenty-third  Street,  and  leased  a  portion  of 
it  to  the  Erie  company  for  offices.  Fisk  made  his  home  in  this  building. 


210 


THE  NEW  YORK  STOCK  EXCHANGE 


Fresh  issues 
of  the  stock, 


These  two  men,  with  Frederick  A.  Lane,  a  young  lawyer  whom  they  had 
admitted  to  their  councils,  William  M.  Tweed,  and  Daniel  S.  Miller— Gould’s 
brother-in-law — comprised  the  Executive  Committee  of  the  Erie.  The  prop¬ 
erty  which  they  ruled  had  at  this  time  about  773  miles  of  trackage  and 
an  army  of  employes.  It  did  not,  however,  have  a  large  enough  eapitali- 
zation  to  meet  their  ideas.  They  proceeded  to  remedy  the  defect.  Late  in 
October,  1868,  a  committee  of  the  New  York  Stock  Exchange,  whose  officers 
were  already  sensible  of  the  undesirable  atmosphere  which  Erie  securities 
carried  to  any  market  where  they  were  received,  called  upon 
Mr.  Gould  and  asked  about  the  truth  of  a  rumor  that  there 
had  recently  been  some  fresh  issues  of  the  stock.  Gould 
acknowledged  that  $10,000,000  of  convertible  bonds  had  been  put  out 
since  he  took  the  helm.  He  declared  that  there  would  be  no  new  issue 
“except  in  certain  contingencies,”  which  was  as  courteous  a  way  of  telling 
the  committee  to  go  about  their  business  as  the  mind  of  man  could  devise. 
He  added  that  it  would  require  strong  efforts  on  the  part  of  the  manage¬ 
ment  to  keep  the  road  out  of  a  receiver’s  hands.  As  a  matter  of  fact,  the 
common  stock  outstanding  had  increased  from  $37,765,300  on  September 
30th  to  $57,765,300  on  October  24th,  a  gain  of  nearly  fifty-four  per  cent, 
in  a  little  more  than  three  weeks. 

What  inkling  of  the  true  situation  Daniel  Drew  possessed  there  is  no 
means  of  telling ;  but  he  certainly  felt  unable  to  let  Erie  alone,  even  though 
no  longer  in  control  of  its  management.  He  sold  the  stock  heavily  short. 

Early  in  November  it  was  forced  down  to  35,  and  some  of  the 
Drew  starts  a  English  shareholders  were  selling.  The  annual  fall  crop  move- 
agaLst7tPaiSn  ment,  coupled  with  the  success  of  the  bears  in  locking  up 
greenbacks,  had  now  produced  a  monetary  stringency.  Call 
money  leaped  to  one  and  one-half  per  cent,  per  diem  in  some  instances. 
Merchandise,  as  well  as  securities,  declined  in  value,  and  the  Treasury 
threatened  to  issue  $50,000,000  in  new  currency. 

On  Friday,  November  13th,  Erie  closed  on  the  last  call  at  35%.  While 
the  outside  bears  had  been  selling  the  stock,  the  Gould-Fisk  clique,  who  had 
doubtless  first  sold  on  their  own  account,  and  had  now  changed  their  tac¬ 
tics,  quietly  gathered  it  in.  Fortunately  for  the  ring,  the  English  move¬ 
ment  to  unload  had  not  been  heavy,  and  could  result  in  no  deliveries  of 
fresh  stock  for  another  week  or  two.  A  short  interest  of  some  70,000 
shares  existed,  and  the  stock  was  so  distributed  that  it  seemed 
impossible  for  the  bears  to  cover.  The  situation  was  revealed 
on  Saturday.  Erie  opened  that  day  at  36%,  and  at  about 
6  o’clock  in  the  afternoon  a  tremendous  scramble  to  cover  drove  the  price 
to  52%.  It  was  a  heavy  shock  to  those  who  had  expected  to  profit  by 
attacking  a  virtually  bankrupt  road. 


Bears  in  a 
panic. 


ERIE  UNDER  THE  NEW  CONTROL 


211 


HANIEL  DREW  was  too  old  a  campaigner  to  be  unmindful  of  the  fact 
that  he  was  beaten.  He  saw  in  an  instant  that  he  could  not  hope 
to  cover  without  great  loss.  The  appeal  to  mercy  was  his  only 
recourse.  But  he  knew,  too,  that  he  must  do  more  than  appeal  if  he  were  to 
move  the  unromantic  hearts  of  Fisk  and  Gould,  to  whom  he  himself  had 
taught  strategy,  but  never  mercy.  He  must  offer  a  quid  pro  „Uncle  Daniel>» 
quo ,  and  this  was  possible  through  the  betrayal  of  some  new  a  euitor  for 
associates.  August  Belmont,  representing  foreign  share-  mercy,  after  his 
holders,  who  were  of  course  short  of  the  market  until  their  own  fashl011, 
shares  could  arrive  from  the  other  side,  was  preparing  to  apply  for  an 
injunction  to  put  the  road  into  a  receiver’s  hands,  and  Drew  had  confi¬ 
dential  knowledge  of  the  plan,  which  also  appears  to  have  been  backed  by 
Vanderbilt.  He  called  on  Sunday  evening  upon  Fisk  and  said  that  he  had 
been  in  the  enemy’s  camp,  and  that  Schell  and  Work  were  in  a  scheme  with 
him  to  overthrow  the  Gould  management.  If  Fisk  and  Gould  would  save 
him  from  personal  loss  he  would  reveal  the  details  of  the  hostile  scheme  at 
once ;  if  not,  he  would  join  forces  with  their  foes. 

In  one  of  the  affidavits  filed  in  subsequent  litigation,  Fisk,  who  had  a 
graphic  way  of  describing  things,  related  an  account  of  the  interview,  which 
may  have  been  true  and  certainly  was  interesting.  “I  tried  to  convince 
him,”  said  Fisk,  “that  this  was  one  of  his  old  tricks,  and  that  he  was  the 
last  man  who  should  whine  at  any  position  he  had  put  himself 
in  with  regard  to  the  Erie.  Finally  I  consented  to  go  and  get  “The  la8t  man 
Mr.  Gould.”  Drew,  he  declares,  argued  and  pleaded  with  him,  whine.”°Uld 
begged  him  to  make  a  fresh  issue  of  convertible  bonds,  for 
“no  one  could  know  anything  about  it,”  told  him  that  an  injunction  suit 
was  to  be  brought  in  Belmont’s  name,  threatened,  cajoled,  entreated,  and 
figuratively  crawled  at  his  feet.  The  old  man  was  sent  away,  while  Fisk 
and  Gould  put  their  heads  together  and  planned  to  take  advantage  of  his 
information  without  paying  for  it.  When  he  returned  at  11  o’clock  he  was 
told  that  nothing  would  be  done  for  him.  Then,  Fisk  says,  he  declared  that 
if  the  stock  were  to  be  put  up  he  was  a  ruined  man.  He  renewed  his  pleas, 
offering  to  pay  three  per  cent,  for  the  loan  of  30,000  or  40,000  shares  for 
fifteen  days — in  other  words,  till  stock  could  arrive  from  London — which 
would  mean  anywhere  from  $90,000  to  $120,000.  When  this  offer  was 
rejected,  says  Fisk,  Drew  let  them  know  that  he  would  give  his  affidavit  to  the 
enemy,  adding :  “  You  know  during  the  whole  of  our  other  fights  I  objected 
to  ever  giving  my  affidavit,  but  I  swear  I  will  do  you  all  the  harm  I  can  if  you 
do  not  help  me  in  this  time  of  my  great  need.”  His  enemies  were  callous. 
The  old  man  saw  at  length  that  neither  threats  nor  entreaties  could  pre¬ 
vail,  and,  taking  his  hat,  about  1  o’clock  on  Monday  morning,  he  quietly 
remarked,  “I  will  bid  you  good-night,”  and  stepped  out  into  the  street. 


212 


THE  NEW  YORK  STOCK  EXCHANGE 


,j-7JARLY  on  Monday,  November  15th,  counsel  for  Belmont  appeared 
before  Judge  Sutherland  and  obtained  an  order  restraining  fresh 
issues  of  stocks — which  is  strongly  suggestive  of  the  Briton’s  pro¬ 
verbial  lack  of  humor— and  enjoining  the  Erie  directors  from  removing  the 
funds  of  the  road  out  of  the  Court’s  jurisdiction.  Drew’s  affidavit  was  among 
the  papers,  and  in  it  he  charges  Fisk  and  Gould  with  using 
begTnfsuit11110111  moneY  1°  create  a  lockup,  admitting  himself  particeps 
criminis.  But  his  enemies  had  not  been  idle.  They  had  already 
repaired  to  their  favorite  Barnard,  and 
the  ever-obliging  Judge  issued  an  order, 
authorizing  them,  as  directors,  to  buy 
200,000  shares  of  Erie  for  the  road  at 
any  price  below  par.  Erie  opened  this 
day  at  52,  ran  up  to  61,  fell  to  4814  by 
1  o’clock,  and  rose  again  to  61.  The 
Gould  party  defied  Judge  Sutherland’s 
order  and  kept  taking  in  Erie  until 
Thursday,  November  19th,  when  their 
corner  culminated. 

They  had  worked  the  market  into 
such  shape  on  this  day  that  Drew’s  fear 
of  being  a  ruined  man  must  certainly 
have  been  proved  sound,  save  for  one 
miscalculation.  Some  300,000  shares  of 
Erie,  which  the  bull  clique  fancied  to  be 
safe  across  the  Atlantic,  were  really  dis¬ 
tributed  over  the  country 
in  ten-share  certificates. 

When  the  cash  price  of  Erie 
rose  on  Thursday  afternoon  to  62  these 
shares  began  to  come  upon  the  market 
like  a  landslide.  The  price  dropped  with 
extraordinary  speed  to  42,  although  the 
bears  forced  it  again  to  47  in  their 
anxiety  to  cover.  The  market  was  convulsed  with  excitement.  The  price 
closed  that  day  at  44  bid,  offered  at  a  half.  The  Drew  party  covered,  or 
settled,  at  about  57  or  58,  some  twenty  points  above  their  purchases, 
and  were  understood  to  have  lost  $1,250,000.  At  one  time  there  was  a 
difference  of  about  sixteen  per  cent,  between  cash  stock  and  stock  sold  on  a 
three  days’  sellers’  option. 

Then  followed  a  series  of  ludicrous  and  disgusting  court  proceedings, 
closely  resembling  the  Erie  litigation  earlier  in  the  year.  Judge  Sutherland, 


Culmination 
of  the  corner. 


‘  i  '■ "  \  >  i 
‘  1 

JAMES  FISK,  JE. 


ERIE  UNDER  THE  NEW  CONTROL 


213 


Another  tangle 
of  litigation  — 
report  that  Fisk 
and  Gould  had 
gone  to  Canada. 


on  the  following  Monday,  vacated  Barnard’s  orders  and  appointed  Henry 
E.  Davies,  ex- Judge  of  the  Court  of  Appeals,  receiver  of  the  road.  Judge 
Davies,  when  he  attempted  to  take  possession  of  the  Erie  offices,  wras 
obliged  to  face  a  gang  of  hired  ruffians,  and  withdrew.  Meanwhile,  the  Erie 
clique  applied  to  the  Tammany  Judge,  Cardozo,  for  a  stay  of  the  Sutherland 
proceedings,  and  brought  an  action  in  the  United  States  Circuit  Court 
against  the  very  men  who  were  suing  them,  thus  securing  the  appointment 
of  Jay  Gould  as  receiver  and  the  reductio  ad  absurdum  of 
Fisk’s  selection  as  his  surety.  To  trace  the  complicated  record 
of  all  the  ensuing  legal  proceedings  would  be  an  unprofitable 
task.  On  one  occasion  a  hasty  night  trip  to  Binghamton, 
which  Messrs.  Fisk  and  Gould  made  for  the  purpose  of  getting 
an  injunction  from  Judge  Balcom,  spread  the  rumor  that  they  had  gone  to 
Canada  with  the  company’s  funds.  It  was  certainly  foolish  to  suppose 
that  they  needed  to  leave  the  country  in  order  to  do  what  they  chose  with 
the  Erie  treasury.  But  the  report  had  credence  for  about  a  day. 

The  legal  farce  ended  with  a  sort  of  comic  duello  between  Cardozo  and  a 
respectable  Judge,  Sutherland,  each  vacating,  by  turns,  the  orders  of  the 
other  till  the  decent  man  found  it  undignified,  and  the  case  was  left  in 
Cardozo’s  hands.  He  decided  it,  so  far  as  lay  in  his  power,  in  favor  of  his 
good  friends,  Messrs.  Tweed,  Sweeny,  Fisk,  and  Gould,  in  February,  1869. 
All  the  suits  in  the  case  were  at  length  discontinued,  and  the  Erie  clique, 
acting  through  Fisk,  later  brought  a  more  sensational  suit  against 
Vanderbilt,  which  will  be  noticed  in  succeeding  pages.  As  for  Drew,  he  never 
fully  recovered  from  his  defeat.  The  descent,  which  the  classics  assure  us  to 
be  easy,  had  begun  for  the  once  famous  Speculative  Director. 


HOMMODORE  VANDERBILT  meanwhile  was  lustily  carrying  out  his 
own  plans  for  the  New  York  Central.  On  the  evening  of  Saturday, 
December  19th,  the  directors  of  that  road  startled  the  Street  by 
unexpectedly  declaring  an  eighty  per  cent,  scrip  dividend,  on  the  hypothesis 
that  its  equivalent  in  cash,  at  par,  had  been  invested  in  equipment  and 
purchases  of  rolling  stock.  A  dividend  of  four  per  cent,  on  the 
old  shares  and  the  scrip,  payable  on  February  10,  1869,  was 
also  declared.  The  result  was  that  Central,  which  had  closed 
that  day  at  134,  opened  on  Monday  at  160,  and  no  doubt  there  followed 
a  judicious  garnering  of  profits  by  those  who  had  prior  knowledge  of 
the  event. 

In  considering  the  somewhat  arbitrary  partition  of  this  “melon,”  it 
may  be  looked  upon  as  the  conspicuous  prototype  of  operations  now  so 
frequent  as  to  have  become  “  legitimatized.”  Whatever  criticism  it  provoked 


Vanderbilt’s 
scrip  dividend. 


214 


THE  NEW  YORK  STOCK  EXCHANGE 


Erie  Board 
formed  and 
ended. 


was  largely  due  to  its  original  character.  Many  processes  of  the  early 
times — among  which  the  exploitation  of  Erie  may  almost  be  included  — 
were  simply  the  more  audacious  and  barefaced  precedents,  in  a  ruder 
period,  for  the  stock-watering,  division  of  traffic,  expert  book-keeping,  road 
leasing,  consolidation,  trust  certification,  blind  pooling,  and  other  devices, 
to  which  Wall  Street  and  the  public  are  now  well  broken  in,  and  by  which 
individual  fortunes  are  swollen  at  the  expense  of  investors  at  large.  In  the 
feudal  era  of  stock  and  specie  speculations  resort  was  seldom  had  to  the 
gloves  of  velvet  which  encase  our  modern  and  vastly  multiplied  hands 
of  steel. 

In  January,  1869,  the  Stock  Exchange  adopted  a  law  requiring  the 
registering  of  all  issues  of  active  stocks  at  a  proper  agency.  The  Erie 
directors  refused  to  comply,  and  Erie  was  stricken  from  the 
list.  To  accommodate  this  security,  the  “National  Stock 
Exchange”  — popularly  known  as  the  “Erie  Board” — was 
formed,  and  opened  at  No.  54  Broad  Street  on  March  11th ; 
but  in  September  the  Erie  directors  consented  to  comply  with  the  rule. 
Erie  came  back  to  the  regular  Exchange,  and  the  National  Stock  Exchange 
soon  perished  of  inanition. 

The  merger  of  the  Stock  Exchange,  which  had  533  members,  with  the 
Open  Board  of  Brokers,  possessed  of  354  members,  and  the  Government 
Bond  Department,  having  173  members,  was  arranged  early  in  May,  1869. 
The  Open  Board  ceased  to  exist  on  Monday,  May  10th.  The  brokers  who 
had  traded  for  five  years  under  its  auspices  signalized  its 
decease  by  singing  “Auld  Lang  Syne”  when  the  day’s  work 
was  done.  Then  they  carried  their  first  vice-president,  George 
Henriques,  out  to  Delmonico’s,  seated  in  his  official  chair,  and  brought  him 
in  triumphant  gayety  to  the  Stock  Exchange  Building.  The  same  day  the 
Open  Board  elected  twelve  of  its  members,  among  them  J.  L.  Brownell,  its 
president,  Rufus  Hatch,  S.  B.  Hard,  D.  A.  Boody,  S.  Y.  White,  and  Robert 
Waller,  to  the  first  Governing  Committee  of  the  consolidated  New  York 
Stock  Exchange.  The  committee  embraced,  all  told,  four  classes,  of  ten 
members  each,  and  three  of  the  Open  Board  representatives  entered  each 
class. 

The  Open  Board  turned  over  the  contents  of  its  treasury,  about 
$250,000,  to  the  new  organization,  while  the  members  of  the  Government 
Bond  Department  each  paid  $1,000  to  get  in.  The  enlarged  organization 
began  its  new  life  on  Tuesday,  May  11, 1869,  with  a  membership  of  1,060 
men  and  the  following  officers :  President,  W.  H.  Neilson ;  first  vice-president, 
M.  A.  Wheelock;  second  vice-president,  B.  0.  White;  secretary,  George  H. 
Brodhead;  treasurer,  D.  C.  Hayes;  assistant  secretary,  John  W.  Munro; 
roll-keeper,  W.  Weeber. 


Stock  Exchange 
merger. 


ERIE  UNDER  THE  NEW  CONTROL 


215 


HHERE  is  one  episode  in  the  annals  of  American  speculation  which 
all  who  are  familiar  with  the  Street  recognize  as  preeminent  in 
dramatic  quality — the  gold  corner  of  September,  1869.  It  was  at 
once  the  zenith  of  the  gambling  frenzy  and  the  nadir  of  financial  honor. 
The  names  of  its  victims  comprise  a  list  that  no  one  can  recite,  and  the  evil 
it  produced  covered  a  period  impossible  to  define.  Signalized 
by  the  triumph  of  bribery,  the  debauchery  of  justice,  and  the  corner 

ruin  of  unnumbered  lives,  it  remains  a  stain  upon  the  record 
of  finance,  which  grows  darker  with  every  examination.  We  need  not 
wonder  that  the  day  on  which  this  movement  culminated  should  be  known 
and  remembered  through  the  breadth  of  our  country  by  the  name  of 
Black  Friday. 

Such  practices  as  brought  about  and  accompanied  this  cataclysm  are 
fortunately  no  longer  to  be  seen.  There  has  come  a  change  in  the  Street 
since  the  days  when  men  turned  to  look  at  the  rubicund  countenance  of 
James  Fisk  and  wronder  what  particular  deviltry  had  withdrawn  him  for 
the  moment  from  his  haunts  of  dissipation.  Despite  the  pessimist,  the  con¬ 
ditions  of  our  civilization  do  improve,  and  if  the  baser  elements  of  human 
nature  are  still  at  work,  at  least  the  public  standards  have  been  raised. 

No  necessity  exists  to  characterize  the  scheme  that  brought  about  the 
panic  of  Black  Friday.  The  honest  men  of  the  time  held  one  opinion  of  it — 
an  opinion  which  the  average  reader,  who  has  not  yet  learned  the  story, 
will  doubtless  make  his  own.  The  facts  will  speak  for  themselves.  As  the 
modern  New  York  police  captain  says,  when  too  closely  pressed  with  ques¬ 
tions  on  the  witness  stand,  “The  records  will  show.”  The  incidents  of  this 
occasion  are  clearly  set  forth  in  sworn  testimony,  taken  under  the  auspices 
of  the  National  Government — for  the  Government  was  involved  in  the 
matter,  and  if  the  good  name  of  the  Chief  Executive  was  not  actually 
tarnished  by  the  development  of  the  gold  conspiracy  of  1869,  it  was  no 
fault  of  the  plotters. 


0  understand  properly  the  gold  corner  we  must  recall  the  commercial 
and  financial  atmosphere  of  the  time.  In  previous  chapters  some 
effort  has  been  made  to  describe  it.  The  people  of  the  „  .  . 

L  _  Commission  mer- 

United  States,  it  will  be  remembered,  were  transacting  their  chants  in  the 
business  by  the  aid  of  the  greenback  currency,  an  unnatural  eixties  forced  hy 
and  unstable  medium,  which  was  utilized  nowhere  else.  The  requirements8to 
currency  of  the  great  European  nations  rested  on  the  sound  mate  short 
basis  of  gold.  It  followed  that  any  transactions  between  their  eales  of  gol<L 
people  and  ours  must  be  carried  on  through  the  use  of  gold,  and  the  relative 
values  of  the  metal  and  our  paper  currency,  indicated  in  the  Gold  Room 


216 


THE  NEW  YORK  STOCK  EXCHANGE 


fluctuations,  had  to  be  watched  with  especial  care  by  all  who  maintained 
business  relations  with  foreigners.  The  man  who  bought  American  cotton, 
for  instance,  to  ship  it  abroad,  had  to  contract  for  its  purchase  in  American 
currency,  but  must  turn  it  over  to  his  French  or  English  correspondent  at 
a  price  measured  in  gold.  In  order  to  protect  himself  against  a  fall  in  gold, 
between  the  day  on  which  he  contracted  to  buy  the  produce  and  the  day  on 
which  he  could  present  his  bill  against  the  correspondent  to  a  foreign 
exchange  house  for  discount,  and  thus  get  the  gold  he  needed,  he  must  take 
certain  precautions.  These  consisted  in  going  to  the  Gold  Room,  borrowing 
the  metal,  and  then  selling  it  for  currency  with  which  to  purchase  the 
cotton.  When  his  bill  was  discounted,  he  took  the  gold  which  he  received 
from  the  foreign  exchange  house  and  returned  it  to  the  man  from  whom  he 
had  borrowed  it. 

Inasmuch  as  there  was  a  large  number  of  men 
who  had  to  carry  on  their  business  in  this  way,  gold 
was  in  considerable  demand,  and  any  curtailment  of 
its  supply  would  quickly  raise  its  price— widen,  in 
other  words,  the  difference  between  the  metal  and 
the  greenbacks.  Furthermore,  a  tremendous  rise  in 
the  price,  compelling  the  merchant  to  keep  putting 
up  fresh  margins  of  currency  against  the  gold  he  had 
borrowed  for  legitimate  business  reasons,  might 
force  him  into  bankruptcy  before  he  could  discount 
his  bills.  It  was  a  situation  fruitful  of  opportunity 
for  the  speculative  genius. 

In  the  spring  of  1869  Jay  Gould  had  engineered 
a  successful  upward  movement  in  gold,  but  the  price 
had  since  receded.  He  conceived  the  brilliant  notion 
of  repeating  the  operation  a  few  months  later,  in 

order  to  stimulate  the  export  of  the  produce  of  American  farms  and  thereby 
secure  this  class  of  freight  for  the  Erie  just  at  the  time  when  other  business 
was  dull  and  the  railroad  could  accommodate  the  largest  possible  part  of 
it.  The  farmer  would  profit  by  selling  at  the  very  best  moment,  the  Erie 
would  increase  its  earnings,  and,  incidentally,  Mr.  Gould  would  make 
speculative  profits. 

His  argument  was  of  historic  importance,  and  therefore  deserves  atten¬ 
tion.  The  prices  of  wheat  and  corn  were  fixed  in  the  London 
Mr.  GouM’s  market,  and  were  based  upon  gold,  but  the  farmer’s  actual 
bulling  gold.  return  came  into  his  hands,  of  course,  in  the  form  of  currency. 

It  was  manifestly  to  his  advantage  to  sell  when  gold  was  high, 
as  his  breadstuffs  could  then  be  exchanged  for  a  larger  amount  of  currency 
than  when  gold  was  low.  A  rise  in  the  metal  was  therefore  bound  to  stimu- 


JAY  GOULD. 


ERIE  UNDER  THE  NEW  CONTROL 


217 


late  the  export  movement.  The  fact  that  three  hundred  ships  were  about 
to  carry  grain  from  the  Black  Sea  and  the  Mediterranean  to  London  made 
it  advisable  to  anticipate  them  by  hastening  the  flow  of  our  own  produce 
abroad.1 

Such,  in  brief,  was  Mr.  Gould’s  process  of  reasoning.  It  no  doubt 
contained  elements  of  truth,  though  it  took  no  account  of  the  baneful 
reaction  which  must  follow  an  artificial  stimulus  of  gold.  The  mere  corner¬ 
ing  of  the  metal  Mr.  Gould  conceived  to  be  easy.  There  were  not,  as  a  rule, 
more  than  $20,000,000  or  $25,000,000  of  it  in  the  New  York  market  at 
any  one  time.  But  the  difficulty  lay  in  preventing  an  overflow  of  the 
National  Treasury.  To  avoid  this  danger  he  must  convert  General  Grant  — 
who  had  been  elected  President  in  the  previous  year— to  his  way  of 
thinking. 


apl 

m 


Gould  and 
Corbin  endeavor 
to  persuade 
General  Grant 
to  help  the 
farmer  market 
his  crops. 


MONG  the  residents  of  this  city  was  one  Abel  Rathbone  Corbin,  a 
former  attorney,  speculator,  and  lobbyist,  now  an  elderly  church 
member  and  the  brother-in-law  of  General  Grant.  Gould  deter¬ 
mined  to  make  Corbin  a  channel  through  which  to  reach  and  influence  the 
President.  He  succeeded  in  establishing  cordial  relations  between  Corbin 
and  himself  and  in  inducing  the  latter  to  accept  his  view 
about  the  great  necessity  for  helping  the  farmer  to  market 
his  crops.  In  June  General  Grant  came  to  this  city  as  his 
brother-in-law’s  guest.  Corbin  arranged  a  meeting  between 
the  President  and  Mr.  Gould.  Grant  was  persuaded  to  accept 
the  hospitality  of  Gould  and  Fisk  at  a  theatre  party  and  later 
at  a  dinner  on  board  their  splendid  Boston  steamer.  At  this 
dinner  the  President  was  questioned  about  his  views  on  the  financial  situ¬ 
ation.  His  reply  was  indicative  of  the  statesman’s  ability  to  detect  the 
truth  behind  the  sham.  There  was,  said  he,  a  certain  amount  of  fictitious¬ 
ness  about  the  country’s  prosperity,  and  it  might  as  well  be  tapped  in  one 
way  as  another.  Such  a  remark  evidenced  his  belief  in  the  advisability  of 
lowering  the  gold  premium.  Mr.  Gould  afterward  described  the  effect  upon 
himself  as  that  of  a  wet  blanket.  He  tried  to  persuade  the  President  that 
the  policy  of  selling  the  metal  would  work  general  disaster.  “  I  took  the 
ground,”  said  he,  relating  the  event  upon  the  witness  stand,  “that  the 
Government  ought  to  let  gold  alone,  and  let  it  find  its  commercial  level ; 
that,  in  fact,  it  ought  to  facilitate  an  upward  movement  of  gold  in  the 


1  Mr.  Gould  attributed  the  hold  this  argument  took  upon  his  mind  to  the  influence  of  James  McHenry, 
an  English  capitalist.  McHenry  was  certainly  in  the  gold  conspiracy,  for  he  used  his  good  offices  to  pro¬ 
cure  the  publication,  on  August  25th,  as  a  leading  editorial  in  the  A7 etc  York  Times, oi  an  article  purporting 
to  explain  the  Administration’s  policy,  and  calculated  to  stimulate  the  price  of  gold.  It  was  written  by 
Abel  R.  Corbin.  The  Times  published  it  in  good  faith. 


218 


THE  NEW  YORK  STOCK  EXCHANGE 


fall.” 1  Mr.  Gould  did  not  add  that  he  had  in  view  an  “  upward  movement  ” 
which  would  carry  the  price  of  gold  to  200  or  more. 

Had  the  master  of  Erie  been  accustomed  to  retire  after  one  rebuff  he 
would  never  have  occupied  the  place  of  power  he  then  held.  The  capacity 
to  pursue  an  object  with  unflagging  energy  was  one  of  the  features  of  his 
success.  He  perceived  the  necessity  of  converting  the  President.  In  suc¬ 
ceeding  weeks,  with  Corbin’s  aid,  he  contrived  to  have  an 
Their  method  o!  extraordinary  number  of  men  meet  General  Grant  in  a  casual 
President’s  mind.  waY>  and  just  as  casually  to  express  the  view  that  a  forcing 
down  of  the  price  of  gold  would  prove  a  great  obstacle  to  the 
marketing  of  our  surplus  crops.  This  tended  to  induce,  in  the  President’s 
mind,  the  belief  that  all  men  of  financial  knowledge  agreed  in  this  opinion. 
The  effect  of  a  sudden  rise  in  the  gold  premium  upon  other  phases  of  our 
industries  was  left  quite  out  of  consideration.  An  additional  advantage  to 
the  allies  was  obtained  in  the  appointment,  as  Assistant  Treasurer  in 
New  York,  of  General  Daniel  Butterfield,  who,  it  was  believed,  was  dis¬ 
posed  to  further  materially  the  patriotic  project  to  aid  American  exports. 
Mr.  Corbin’s  good  offices  were  utilized  to  make  this  move  in  the  game. 

On  the  morning  of  September  2d,  General  Grant  passed  through  New 
York.  He  breakfasted  at  Corbin’s  house  and  heard  some  additional  argu¬ 
ments  on  political  economy  from  his  affectionate  brother-in- 
its  apparent  jaw.  The  result  was  that  the  President  wrote  to  Secretary 

success.  ° 

George  S.  Boutwell  of  the  Treasury  advising  against  the 
forcing  down  of  gold.  Corbin  informed  Mr.  Gould  of  the  letter  before  it  had 
even  left  New  York.  Mr.  Boutwell  was  out  of  Washington  when  he  received 
it.  He  telegraphed  at  once  to  Secretary  Richardson:  “Send  no  order 
to  Butterfield  as  to  sales  of  gold  until  you  hear  from  me.” 

Gould  had  already  formed  a  pool  with  Arthur  Kimber  and  William 
S.  Woodward,  two  operators  of  prominence,  for  the  bulling  of  gold,  and 
had  purchased  several  millions  without  greatly  affecting  the  price,  which 
was  naturally  tending  downward.  His  brokerage  firm,  Smith,  Gould, 
Martin  &  Co.,  now  purchased  for  Mrs.  Corbin,  as  a  token  of  esteem,  $500,- 
000  in  gold  at  132,  and,  a  little  later,  $1,000,000  of  gold  at  133%  for 
Mr.  Corbin,  as  a  reward  of  merit.  By  September  4th  the  premium  on  gold 
stood  at  37.  In  the  next  two  weeks  it  scored  no  appreciable  advance. 
Mr.  Woodward,  having  learned  from  Washington  that  the  Treasury  would 
probably  sell  gold,  threw  his  holdings  upon  the  market,  after  notifying 
his  associates,  as  he  had  the  right  to  do.  They  amounted  to  some 
$12,000,000,  and  had,  of  course,  to  be  taken  by  Messrs.  Gould  and  Kimber. 
Two  further  misfortunes  occurred.  An  attempt  was  made  to  suborn 

1  Testimony  before  the  Congressional  Committee,  of  which  James  A.  Garfield  was  chairman,  appointed 
to  investigate  the  gold  corner  of  1869.  House  Report  No.  31,  Forty-first  Congress,  Second  Session. 


ERIE  UNDER  THE  NEW  CONTROL 


219 


General  Horace  Porter — our  present  Ambassador  to  France,  who  was 
then  General  Grant’s  private  secretary  —  and  the  ring’s  offer  was  promptly 
spurned.  On  Sunday,  September  19th,  Mr.  Kimber  gave  notice  General  Porter 
that  he  would  withdraw  from  the  pool.  On  Monday  he  liqui-  rejects  the 
dated  his  holdings  of  gold,  amounting  to  $12,000,000,  and  nng  s  offer* 
also  went  short  of  the  market,  an  enterprise  which  eventually  caused  his 
bankruptcy.  Gould  had  to  increase  his  holdings  tremendously  to  prevent 
a  decline. 

The  President  had  set  out  on  September  13th  to  visit  a  friend  in  the 
little  town  of  Washington,  Pennsylvania,  where  there  was  no  direct  railroad 
communication.  It  is  said  that  he  was  persuaded  to  take  the  journey, 
through  the  influence  of  the  leaguers.  At  all  events,  it  pleased  them  to  have 
him  there.  Two  or  three  days  later,  Gould,  who  had  been  keeping  Fisk  in 
the  dark,  revealed  the  scheme  and  invited  his  partner’s  assistance. 

Some  indication  of  Fisk’s  character  has  already  been  given.  It  should 
be  added  that  Gould  and  Fisk  were  each,  in  a  measure,  the  counterpart  of 
the  other.  Gould  was  slight  of  structure,  quiet,  cool,  adroit,  and  unin¬ 
fluenced  by  passion.  Apparently  his  judgment  and  methods 
were  little  swayed  by  his  opinion  of  another  man’s  personality.  ^  contract 
His  domestic  life  was  exemplary.  In  a  modified  form  he  com¬ 
bined  Drew’s  speculative  zeal  with  his  interest  in  religion.  Later  in  life  he 
contributed  to  the  cause  of  church  missions.  Fisk  was  large  and  portly  of 
person,  boisterous  and  boastful  of  manner,  loud  voiced,  red  faced,  and  jovial. 
When  both  united  in  the  purchase  of  the  Grand  Opera  House,  and  therein 
established  the  Erie  offices,  it  was  Fisk’s  inclination  which  furnished  the 
rooms  like  the  palace  of  a  Venetian  doge.  He  gratified  his  love  of  display 
by  becoming  the  impresario  of  the  adjoining  stage,  drawing  upon  the 
histrionic  troupe  for  his  favorites,  and  exhibiting  them  in  his  opera  box. 
He  drove  through  the  city  streets  with  a  noisy  party  of  convivial  spirits, 
and  strutted  about  the  decks  of  his  Boston  steamers  in  an  Admiral’s  uni¬ 
form,  plentifully  bedecked  with  gilt  stripes  and  stars. 1  He  was  not  only  an 
“Admiral”  but  a  Colonel,  his  land  command  being  the  Ninth  Regiment. 
His  anger  or  his  levity  burst  with  equal  ease  into  profane  ejaculations  or 

1  The  Garfield  committee  characterized  Fisk’s  connection  with  the  corner  in  the  following  words :  “  He 
was  told  that  Corbin  had  enlisted  the  interest  of  persons  high  in  authority ;  that  the  President,  Mrs.  Grant, 
General  Porter,  and  General  Butterfield  were  corruptly  interested  in  the  movement,  and  that  the  Secretary 
of  the  Treasury  had  been  forbidden  to  sell  gold.  He  joined  the  movement  at  once,  and  brought  to  its  aid 
all  his  magnetic  and  infectious  enthusiasm.  The  malign  influence  which  Catiline  wielded  over  the  reckless 
and  abandoned  youth  of  Rome  finds  a  fitting  parallel  in  the  power  which  Fisk  carried  into  Wall  Street, 
when,  followed  by  the  thugs  of  Erie  and  the  debauches  of  the  Opera  House,  he  swept  into  the  Gold  Room 
and  defied  both  the  Street  and  the  Treasury.” 

A  contemporary  of  Fisk,  in  a  newspaper  article  published  November  7,  1869,  relates  that  when  the 
future  financier  was  a  peddler  in  New  England,  and  had  begun  to  run  his  father’s  business,  the  elder  Fisk 
was  alarmed  at  the  extravagant  methods  of  his  son,  who  was  driving  six-horse  wagons  along  their  routes, 
and  remonstrated  with  him.  Thereupon  the  son  offered  to  employ  his  father  at  a  salary.  The  conversa¬ 
tion  ran:  Fisk,  p'ere  — “Well,  James,  how  much  of  a  salary  will  you  give  me?”  Fisk,  fils  —  “I  will  give 
you  $3,000  a  year,  father.”  Fisk, pere  —  “It’s  a  bargain.”  Fisk,  fils  —“All  right.  But  I  want  you  to 
understand  distinctly  that  you  are  my  clerk,  and  I  don’t  want  you  to  put  on  any  of  your  d - d  airs.” 


220 


THE  NEW  YORK  STOCK  EXCHANGE 


surprising  jests.  Bluff,  audacity,  and  energy  characterized  his  actions.  He 
thought  nothing  of  threatening  libel  suits  when  detected  in  the  most  pal¬ 
pable  frauds.  As  a  rule  he  was  an  admirable  weapon  in  the  hands  of  Mr. 
Gould.  At  times  he  became  more  than  a  weapon. 

Fisk  plunged  enthusiastically  into  the  market  upon  learning  that  his 
assistance  would  be  prized,  and  a  fresh  step  in  the  campaign,  taken  on 
Friday,  September  17th,  bears  the  marks  of  his  invention.  Corbin  was 
Fisk  thickens  persuaded  to  dispatch  a  letter  to  the  President,  urging  him  to 
the  plot  and  the  stand  by  his  decision  not  to  sell  gold.  The  epistle  was  carried 
President  sees  a  to  the  little  Pennsylvania  town  by  Fisk’s  special  messenger, 
great  light.  General  Porter  was  with  the  President,  and  had  doubtless 
acquainted  him  with  the  offer  to  which  reference  has  been  made.  This 
extraordinary  letter  made  the  whole  matter  plain.  General  Grant  told  his 
wife  to  write  at  once  to  his  sister,  Mrs.  Corbin,  conveying  his  wish  that 
Corbin  should  instantly  disconnect  himself  with  all  speculation  in  gold. 
Mrs.  Corbin  received  this  missive  on  Wednesday,  September  22d,  the 
President  having  meanwhile  started  for  the  National  Capital. 

Gould  called  at  Corbin’s  house  and  this  letter  w^as  shown  to  him.  He 
realized,  forthwith,  that  its  publication  would  destroy  his  plans.  It  had 
produced  its  effect  upon  Corbin.  The  veteran  lobbyist  was  through  with 
the  game.  But  though  he  now  washed  his  pious  hands  of  the  speculation, 
he  demanded  a  share  of  the  spoils.  Gould  had  already  given  him  a  check 
for  $25,000,  At  the  current  quotation  for  gold  Corbin  felt  that  he  and  his 
wife  wrere  entitled  to  $100,000  more.  Here  was  a  dilemma  for  the  architect 
of  the  imperilled  corner.  Corbin,  whose  further  services  could  be  of  no  value, 
asked  for  a  sum  large  enough  to  be  embarrassing.  If  it  were  denied  him  he 
could  in  a  moment  ruin  the  gold  project  by  showing  the  President’s  letter — 
for  the  rumor  had  been  industriously  spread  that  the  bulls  had  secured  an 
alliance  with  the  Administration.  The  revelation  of  the  truth  wrould  have 
been  fatal.  Mr.  Gould  asked  for  a  day  in  wilich  to  consider.  Twenty-four 
hours  later  he  wrnited  on  Corbin  and  informed  him  that  if  he  would  stick  to 
the  scheme  and  carry  his  gold  to  the  end,  he  should  receive  what  he  asked 
for;  if  he  drew  out,  he  should  get  nothing.  Jay  Gould  wras  a  rare  judge  of 
human  nature.  He  made  up  his  mind  that  Corbin’s  interest  in  gold  must 
be  retained  if  Corbin’s  loyalty  wrere  to  last.  But  Corbin  wras  bound  to  be 
clear  of  the  matter  at  any  price.  He  dreaded  exposure.  The  affair  wras  too 
dashing  and  audacious  to  please  his  timid  soul.  In  an  apparent  spasm  of 
Corbin  weakens  virtue  he  rejected  the  offer,  his  decision  being  considerably 
and  withdraws  reinforced  by  the  attitude  of  his  wife.  This  cowardice  wras  a 
from  the  scheme.  matter  Gf  much  subsequent  satisfaction  to  him,  and  in  his 
testimony  before  the  Garfield  committee  he  dwelt  grandiloquently  upon 
the  fact  that  he  had  “refused  $100,000  on  a  rising  market.” 


ERIE  UNDER  THE  NEW  CONTROL 


221 


As  Mr.  Gould  stood  looking  at  the  weak-kneed  deserter,  whatever 
thoughts  chased  one  another  through  the  brain  behind  his  penetrating 
eyes  remained  an  unsolved  riddle.  Contempt  forthe  pitiful  shyster  to  whom 
he  listened,  the  quelling  of  sudden  anger  by  an  instant  recognition  of  its 
uselessness,  a  lightning-like  survey  of  the  field  of  possibilities,  and  as  swift 
a  determination  to  save  himself  at  any  cost — these  we  may  fancy  to  be  the 
feelings  which  convulsed  his  remarkable  mind.  “Mr.  Corbin,”  he  said,  in  a 
low  and  deliberate  voice,  “  if  that  letter  gets  out,  I  am  undone.”  The  door 
of  the  house  closed  after  his  slender,  retreating  figure.  Jay  Gould  had 
determined  to  bring  his  corner  to  an  end. 


(§?§§i]HE  precise  nature  of  the  leader’s  plans  in  the  emergency  is  a  matter 
of  question.  But  there  is  no  doubt  about  what  soon  transpired. 
Fisk  made  furious  purchases  of  gold,  most  of  which  were  eventually 
repudiated,  while  Gould,  under  cover  of  this  buying,  was  quietly  unloading 
his  holdings  and  openly  purchasing  just  enough  to  make  people  believe 
him  a  bull.  It  is  probable  that  Fisk  then  knew  nothing  of  the  Grant  letter. 
According  to  his  own  testimony  he  still  thought  the  campaign  safe.  It 
must  be  borne  in  mind,  however,  that  he  was  a  notorious  liar,  and  there  is 
little  doubt  that  before  Black  Friday  came  Messrs.  Gould  and  Fisk  had 
arrived  at  a  thorough  and  frank  understanding,  and  had  agreed  to  divide 
the  profits  upon  the  completion  of  their  joint  operation. 


XYI 


BLACK  FRIDAY 


T  length  every  condition  requisite  to  the  disaster  of  Black 
Friday  had  been  engendered  by  the  clique.  The  movement 
made  itself  felt  early  in  the  week  of  September  18th,  and 
the  situation  grew  wTorse  with  each  succeeding  day.  Gold 
opened  on  Wednesday,  September  22d,  at  137%,  and  before 
5  o’clock  that  afternoon  Fisk’s  violent  buying  had  driven 
it  five  points  higher.  The  closing  quotation,  141%,  shot  a  tremor  through 
the  bears ;  it  worried  also  the  merchants,  long  used  to  regard  a  two  per 
cent,  fluctuation  in  the  metal  as  sufficient  for  one  day,  and  now  alarmed 
lest  an  interval  of  war-time  uncertainty  should  recur. 

Fallacious  rumors  of  an  impending  break  with  Spain  over  the  Cuban 
question,  probably  set  on  foot  by  the  exultant  bulls,  added  to  the  current 
disquietude.  In  all  probability,  however,  the  arguments  for  short  selling 
did  not  stop  here.  There  were  bold  spirits  in  the  Gold  Room,  and  the 
natural  desire  of  many  to  profit  by  the  unreasonably  high 
Bears  tempted  price  of  the  metal  was  reinforced  by  another  consideration. 
attackUFther  The  bull  ring  was  paying  half  of  one  per  cent,  a  day  for  the 
currency  with  which  it  carried  gold.  Any  one  who  borrowed 
gold  in  order  to  sell  it  short  could  earn  that  rate  of  interest  on  the  currency 
he  put  into  the  lender’s  hands,  and  the  opportunity  seemed  tempting. 

With  the  beginning  of  Thursday’s  market  the  bears  discovered  their 
plight  beyond  mistake.  There  was  no  reaction  from  the  high  price  of  the 
preceding  day.  On  the  contrary,  the  first  sale  was  made  at  141%,  and, 
amid  a  struggle  which  racked  the  Gold  Room  and  rechoed  through  the 
Street,  the  remorseless  indicator  scored  an  advance.  It  was  a  day  of 
terrible  excitement.  “As  the  roar  of  battle  and  the  screams  of  the  victims 
resounded  through  New  Street,  it  seemed  as  though  human  nature  were 
undergoing  torments  worse  than  any  that  Dante  ever  witnessed  in  hell.”1 

1  New  York  Times,  September  24,  1869. 


BLACK  FRIDAY 


223 


The  final  bid,  at  5:30  o’clock,  was  143%,  the  offer  being  at  one-half.  The 
exhausted  brokers  and  panic-stricken  speculators  who  emerged  from  the 
scene  of  conflict  saw  bankruptcy  facing  them.  One  night  of  anxiety  and 
fear  stood  between  the  bears  and  ruin. 

The  clique  now  had  in  its  control  between  $110,000,000  and  $118,000,- 
000  of  purchased  gold.  The  list  of  the  shorts  was  remarkable.  “It 
commenced  with  Jay  Cooke,”  said  Fisk,  “and  probably  went  through  250 
houses.  In  fact,  it  included  every  firm  in  this  country  of  any  magnitude 
whatever.  .  .  .  We  had  called  in  $6,000,000  or  $7,000,000 — enough  to 
make  a  sharp  demand.  The  banks  held  about  as  much  more,  and  we  there¬ 
fore  substantially  held  all  there  was  available.”1  One  of  the  clique’s 
brokers,  E.K.  Willard,  estimated  that  10,000  or  15,000  persons  were  short 
of  gold.  Fisk  now  proposed  to  his  allies  that  they  should  publish  a  list  of 
the  shorts  in  a  newspaper  the  following  morning,  and  offer  to  F.gk,g  pJan  q{ 
settle  at  a  good  stiff  price,  with  the  threat  that  if  the  offer  newspaper 
were  refused  the  price  would  be  advanced  to  200  on  Saturday.  terrorism 
His  plan  was  rejected  as  too  dangerous.  It  was  decided  to  rejected' 
renew  the  bidding  in  the  market,  and  that  several  of  the  brokers  in  the 
ring’s  employ  should  terrify  the  shorts  into  a  private  settlement.  Mean¬ 
while  other  agents  were  instructed  to  keep  selling  gold  for  Mr.  Gould. 
Henry  N.  Smith,  Gould’s  partner,  bade  them  “Sell,  sell,  sell  —  only  don’t 
sell  to  Fisk’s  brokers.” 


ONG  before  the  gavel  of  the  vice-president  started  the  Gold  Room 
business  on  the  morning  of  September  24th,  the  financial  district 
was  peopled  with  an  extraordinary  crowd.  Its  visitors  were  quite 
unaware  that  Black  Friday  had  dawned.  They  could  not  foresee  to  what 
lengths  the  clique  would  go.  Doubtless,  until  the  noose  was  tightening 
about  his  neck,  the  average  victim  of  the  corner  did  not  believe  himself 
condemned.  But  every  man  knew  it  was  a  time  of  frightful  peril. 

Fisk  had  selected  a  house — William  Belden  &  Co. — through  which  to 
conduct  his  main  operations.  Mr.  Belden  was  his  former  partner,  and  a 
man  upon  whom  he  could  depend.  He  had  been  buying  tremendously  for 
Fisk  on  Wednesday  and  Thursday.  He  had  also  procured  a 
minor  agent,  one  Albert  Speyers,  an  elderly  man  of  small  Speyers  selected 

07  r  "  1  u  as  an  unwitting 

intelligence,  who  was  well  calculated  to  do  what  he  was  told  agent, 
and  ask  no  questions,  and  Speyers  had  already  bought  some 
tens  of  millions  for  the  clique.  The  firm  of  W.  F.  Livermore  was  also 
commissioned  to  buy  gold  for  Fisk,  who  eventually  repudiated  the  order. 

1  Testimony  before  the  Garfield  Congressional  Committee  appointed  to  investigate  the  gold  corner  of 
1869.  House  Report  No.  31,  Forty-first  Congress,  Second  Session. 


224 


THE  NEW  YORK  STOCK  EXCHANGE 


Early  on  Friday,  Belden  piloted  Speyers  to  a  small  back  room  in  the 
office  of  William  Heath  &  Co.,  No.  15  Broad  Street,  where  Gould  and  Fisk 
awaited  him.  He  was  instructed  to  buy  all  the  gold  he  could  at  145  and 
under,  the  quotation  at  the  time  being  about  on  a  level  with  the  closing 
price  of  Thursday.1  He  emerged  from  Heath’s  office,  passing  a  cordon  of 
stalwart  bullies,  who  had  been  posted  at  the  entrance  for  protection,  and 
through  a  growing  crowd  he  threaded  his  way  to  New  Street.  It  was  some 
time  before  10  o’clock,  the  hour  for  the  opening  of  the  Gold 
Early  bidding  Room.  Brokers,  carrying  orders  which  they  feared  they  could 
not  execute,  or  sick  with  anticipation  of  their  own  peril,  had 
formed  a  knot  in  the  centre  of  the  crowd  before  the  entrance 


for  gold  in 
the  Street, 


and  were  sporadically  bidding  for  the  metal,  while  pressing  them  on  every 
side  were  the  merchant,  trembling  on  the  verge  of  an  undeserved  bank¬ 
ruptcy,  the  simple  gambler,  furious  or  joyful  at  the  trend  of  prices,  the 
“lame  duck, ’’scowling  with  envy  at  an  excitement  he  could  no  longer  share, 
and  the  nondescript  mob  which  always  gather  about  a  set-to  in  the  Street. 
Speyers  joined  this  throng,  and  when  the  doors  of  the  Gold  Room  were 
opened  made  his  way  inside.  He  began  briskly  to  purchase  gold  at  the 
prevailing  figures.  When  the  price  had  reached  145,  a  boy  approached  him 
with  a  slip  of  paper  from  Fisk  telling  him  to  put  it  up  to  150  at  once.  He 
followed  the  order  and  then  ran  out,  and  back  to  Heath’s  office  in  Broad 
Street,  to  make  his  first  report  in  the  little  back  room. 

From  the  temporary  headquarters  of  the  masters  of  Erie  there  was  no 
need  for  them  to  emerge  in  person.  But  the  direction  of  all  this  strategy, 
which  convulsed  a  community  and  disturbed  the  commerce  of  the  civilized 
world,  issued  from  their  retreat. 

Here  Fisk,  who  loved  the  centre  of  the  stage,  was  revelling  in  his  power 
and  importance.  He  sat  in  his  shirt  sleeves,  armed  with  a  heavy  cane,  and 
intensified  his  forcible  remarks  with  oaths  and  gestures.  As 
ofhfinlnce!e0n  ^ie  spir^  moved  him  he  arose  and  strode  up  and  down  the 
room,  still  carrying  the  cane,  and  informing  his  satellites,  in 
pompous  tones,  that  he  was  the  Napoleon  of  finance.  Mr.  Gould  sat 

1  It  is  natural  that  in  the  accounts  now  existing  of  the  terrific  scenes  of  Black  Friday  there  should  be 
apparent  certain  discrepancies.  The  newspaper  descriptions  of  the  time  varied  remarkably.  Many 
contradictions  occur  in  the  testimony  taken  before  the  Garfield  Committee.  The  statements  of  the  sworn 
witnesses,  leaving  out  of  account  the  commission  of  perjury,  in  which  Mr.  Fisk,  for  instance,  appears 
largely  to  have  indulged,  contain  errors  due  to  other  and  natural  causes.  In  regard  to  that  very  salient 
point,  the  range  of  the  price  of  gold,  the  testimony  is  conflicting.  Most  of  the  witnesses  gave  the  highest 
quotation  as  162%  ;  Albert  Speyers  testified  that  it  was  163%  ;  Fisk  said  that  it  was  163  or  164;  the 
Herald,  said  that  in  one  part  of  the  Room  it  reached  165 ;  while  in  the  Evening  Post’s  figures,  purporting  to 
be  the  accurate  record  of  the  official  indicator,  the  highest  quotation  noted  was  160%.  Of  course  it  is  out 
of  all  belief  that  the  indicator  chronicled  every  sale  made  that  day.  The  opening  price  of  gold  was  stated, 
by  James  B.  Hodgskin,  Chairman  of  the  Arbitration  Committee  of  the  Gold  Exchange,  to  have  been  143, 
and  Speyers  testified  that  he  began  his  Black  Friday  buying  when  gold  stood  at  143%,  and  did  it  in  the 
Gold  Room.  Yet  the  evidence  is  conclusive  that  when  the  Gold  Room  formally  opened  at  10  o’clock  the 
first  quotation  given  upon  the  indicator  was  150.  Speyers  must,  therefore,  have  been  buying  before  the 
gavel  sounded.  It  is  interesting  to  note  that  while  Speyers  testified  that  he  was  not  at  all  excited!  on 
Black  Friday  it  was  commonly  believed  that  he  had  gone  insane.  “My  opinion  of  Speyers  that  after¬ 
noon,”  said  Fisk,  “was  that  he  was  as  crazy  as  a  loon.” 


BLACK  FRIDAY 


225 


quietly  by,  content  to  watch  his  antics  as  an  indulgent  father  may  con¬ 
template  the  doings  of  a  precocious  child.  It  was  Fisk  who  spoke  when 
Speyers  came  rushing  in  to  say  that  his  price  had  reached  his  limit.  He 
told  the  broker  to  go  back  and  buy  all  the  gold  he  could  get  at  150. 

The  formal  opening  of  the  day’s  business  in  the  Gold  Room  saw  the 
metal  at  that  price,  and  for  about  an  hour  it  made  no  appreciable  advance. 
Apparently  the  ring  were  not  quite  ready  to  put  the  screws  on.  But  the 
crowd  well  knew  that  the  agony  wras  to  increase,  and  momentarily  expected 
the  signal.  Two  hundred  brokers  crowded  about  the  fountain, [where  stood 
the  Cupid,  carrying  a  dolphin  in  his  arms,  and  hurled  their  fierce  ejacula¬ 
tions  across  the  enclosure.  At  the  centre  ring  was  packed  a  mob  of  specta¬ 
tors,  many  of  them  livid  with  fear.  There  were  two  galleries  in  the  Gold 
Room,  the  lower  one  set  apart  for  messengers  and  the  upper  one  now  filled 
with  additional  lookers  on.  Thousands  who  could  not  enter  crowded 
New,  Broad  and  Wall  streets.  Just  outside  the  entrance,  where  the 
indicator  looked  into  New  Street,  the  crowd  was  thickest. 

Here  the  silk-hatted  importer  jostled  elbows  with  the  shoe-  gthr™°gs  m  the 

string  gamester,  the  gamins  supplemented  the  babel  from  the 

Gold  Room  with  their  jests,  and  the  pickpocket  covertly  plied  his  calling. 

While  Speyers  was  buying  gold  at  150,  a  prominent  member  of  the 
Stock  Board  pushed  his  way  through  the  crowd  to  tell  him  that  the 
brokers  at  the  Exchange  were  furious,  and  that  if  he  continued  to  bid  some 
one  would  shoot  him  down.  Speyers  rushed  out  of  the  Gold  Room  and 
into  the  Exchange  next  door,  making  hurriedly  for  the  platform,  which  he 
mounted  with  the  Chairman’s  permission.  He  declared  that  _  . 

V  Speyers  myites 

he  heard  he  was  to  be  shot  and  had  come  to  see  the  cowards  the  stock 
and  scoundrels  who  said  they  would  shoot  him.  He  would 
continue  to  bid.  Having  thrown  out  his  defiance  he  descended 
the  platform  and  made  for  the  door,  some  of  the  members,  who  probably 
regarded  his  action  as  silly  bravado,  hissing  as  he  went.  Then,  still  in  a 
fever  of  excitement,  he  ran  back  to  Heath’s  office  to  report  again. 

Fisk  told  him  to  return  to  the  Gold  Room  and  put  gold  up  to  160, 
adding:  “You’d  better  be  quick,  for  I’ve  given  some  other  brokers  the 
order  to  pay  that  price  for  it.”  Without  a  question  as  to  his  own  security 
or  the  sanity  of  the  movement,  without  one  cent  of  margin  or  a  vestige  of 
written  authority  for  this  wild  order,  the  infatuated  broker  rushed  back  to 
his  work. 

It  was  shortly  after  11  o’clock  that  the  woes  of  anxiety  in  the  Gold 
Room  gave  way  to  the  torments  of  realization.  For  a  long,  dark  hour, 
hundreds  of  men  of  all  classes,  from  the  opulent  merchant  or  speculator  to 
the  clerk  whose  scant  earnings  were  imprisoned  in  a  margin,  had  stood  at 
the  outer  railing  and  turned  fearful  eyes  toward  the  indicator  that  dis- 


brokers  to 
shoot  him. 


THE  “COLD  ROOM,”  NEW  YORK  GOLD  EXCHANGE,  BROAD  STREET.  1869. 


BLACK  FRIDAY 


227 


played  the  record  of  the  struggle.  Some  there  were  who  had  already  slid 
over  the  edge  of  the  bankruptcy  pit,  but  many  were  simply  on  the  verge. 
A  few  more  advances  marked  by  that  deadly  indicator,  and  business,  credit, 
fortune,  happiness — yes,  even  honor — would  be  gone.  Should 
the  bulls  fail  to  carry  forward  their  designs,  should  exhausted  oftiwpit86 
capital  or  unconquerable  foes  compel  them  to  withdraw,  or 
should  the  Treasury — as  few  dared  to  hope — come  to  the  rescue  before  it 
was  too  late,  the  inflated  price  would  sink  as  briskly  as  it  had  risen,  and  the 
air  would  still  be  good  to  breathe  and  the  sunshine  good  to  see.  So  they 
had  waited,  as  criminals  in  the  shadow  of  death  may  wait  for  a  reprieve. 
When  Speyers’  inexorable  voice  began  to  lift  the  premium  higher,  they  saw 
their  last  hopes  melting. 

Brokers  by  the  score  were  fighting  against  ruin  and  had  no  sympathy 
to  spare  for  lookers-on.  In  a  moment  the  premium  had  risen  to  55. 
The  Room  burst  into  a  semblance  of  the  Inferno.  “The  revengeful  war- 
whoop  of  the  most  furious  Indians,  the  terrific  yells  issuing  from  a  lunatic 
asylum,  would  not  equal  in  intensity  the  excited  cries  of  the  speculators  in 
the  Gold  Room.”1  At  the  railing  that  guarded  the  fountain  the  Furies 
seemed  to  have  broken  loose.  Men  rushed  about  the  little  enclosure  shriek¬ 
ing  their  bids  or  offers  like  barbarians  running  amuck.  Curses  and  pro¬ 
testations  burst  from  their  lips.  The  jargon  of  speculation  was  interlarded 
with  the  raving  of  disordered  minds.  While  the  premium  advanced,  more 
than  one  man  seemed  for  the  time  to  have  gone  insane.  At  the  railing 
where  Speyers  stood  flinging  his  terrible  bids  at  his  fellow 
brokers,  the  clamor  of  two  hundred  voices,  articulating  Scene  ar  the 

,  ,  .  r5  Gold  Room 

desperate  replies  or  desperate  oaths,  greeted  his  every  word.  fountain. 

Fingers  that  had  shot  into  the  air  to  emphasize  an  offer  twined 
themselves  in  the  gray  hairs  of  their  owner.  Voices  that  had  grown  weary 
demanding  what  could  not  be  had  threatened  the  lives  of  the  foes  whom 
they  could  not  reach.  The  groans  that  rose  from  the  mob  of  onlookers  at 
the  outer  rail  added  to  the  tumult  as  the  price  mounted  steadily  higher. 
The  faces  of  thousands  had  taken  on  the  expression  of  hunted  beasts,  while 
here  and  there  some  speculator  for  whom  the  disaster  was  making  a  fortune 
displayed  his  exultation  in  his  eyes.  Often  as  the  indicator  recorded  a 
quotation  hitherto  untouched,  carrying  a  new  batch  of  victims  to  the  pit, 
the  lamentations  of  the  Gold  Room  were  answered  by  fierce  shrieks  of 
pleasure  from  without.  The  crowd  before  the  indicator  in  the  Street  con¬ 
tained  few  losers  and  was  making  merry  with  the  sensation  of  the  hour. 

The  scene  displayed  the  gambler’s  lust  unbridled,  and  was  strongly 
suggestive  of  the  lust  for  blood.  In  the  minds  of  a  few  followers  of  the  gold 
clique  it  excited  visions  of  fortune.  To  the  great  body  of  men  in  the  Gold 

1  New  York  Herald,  September  25,  1869. 


228 


THE  NEW  YORK  STOCK  EXCHANGE 


Room  it  meant  disaster,  or  even  ruin.  The  remembrance  of  past  happiness, 
easily  bought  and  lightly  held,  the  visions  of  bygone  domestic  comforts 
and  delights  of  luxury  and  ambition  added  new  tortures  as  the  means  by 
which  they  had  possessed  these  things  slipped  through  their  fingers. 

The  bids  mounted  with  but  inconsiderable  reactions.  Nothing  was 
apparent  to  hinder  the  raising  of  the  price  to  200,  for  it  seemed  unlikely 
that  the  Treasury,  which  had  permitted  these  excesses,  would  interfere  now. 
But  here  the  general  view  was  mistaken.  The  Treasury  had  kept  in  close 
telegraphic  touch  with  the  situation,  and  relief  was  near.1  Before  it  came 
Speyers  forced  up  the  market  to  160,  and  sustained  it  there,  while  the 
shorts,  in  bursts  of  frenzy,  jumped  the  price  still  higher  in  their  efforts  to 
cover.  It  is  said  to  have  gone  to  165  in  one  part  of  the  room.  Just  about 
noon,  when  the  tension  had  reached  a  pitch  which  nine  men 
out  of  ten  feared  might  drive  them  mad,  James  Brown,  of 
Brown  Brothers,  a  prominent  and  courageous  banker,  sold 
Speyers  $5,000,000  at  160.  It  was  afterward  believed  that 
Mr.  Brown  had  private  means  of  knowing  the  Treasury  was 
breaks  the  great  to  sell  gold.  This  he  denied,  under  oath,  and  nothing  exists 
to  blur  his  character  or  discredit  his  word.  The  effect  was,  at 
all  events,  electrical,  and  when,  a412:07,  the  news  arrived  that  the  Treasury 
would  sell,  the  great  corner  broke  like  a  sapling  before  a  cannon  ball. 

Secretary  Boutwell  had  telegraphed  the  needed  order  to  General 
Butterfield,  in  this  city,  and  five  minutes  after  its  receipt  this  bulletin  was 
posted  at  the  Sub-Treasury : 

“The  Treasury  will  sell,  at  12  o’clock  noon  to-morrow,  four  million  gold 
and  buy  four  million  bonds.  Proposals  will  be  received  in  the  usual  form. 

“Daniel  Butterfield,  Assistant  Treasurer.” 


James  Brown 
dares  to  sell. 
News  of  the 
Treasury’s 
action  to  relieve 
the  market 


This  was  the  handwriting  on  the  wall.  As  the  news  spread  through  the 
Gold  Room,  the  babel  which  had  for  a  moment  lessened  was  renewed  with 
double  volume.  Men  knew  at  last  that  the  Government  had  not  been 
bought.  To  Speyers’  stertorous  cry,  “I’ll  give  160  for  any  part  of 
$5,000,000,”  one  banker  constantly  responded  with  a  sale  of  $1,000,000. 
Then  the  flood  of  offers  descended  upon  the  clique’s  broker,  and  in  an 
instant  the  premium  had  dropped  to  55,  50,  49,  44,  and  was  still  sliding 
downward  when  Speyers  rushed  in  desperation  from  the  room  and  to  the 
headquarters  of  his  principals.  He  told  them  that  the  market 
had  broken  to  140,  and  Fisk  coolly  bade  him  return  and 
renew  his  bid  of  twenty  per  cent,  higher.  “You’re  only  a  broker,  Speyers,” 
he  remarked.  “You’re  perfectly  safe.  We  have  our  own  way  of  doing 
business.  Keep  up  that  status  of  160.” 

'Secretary  Boutwell  had  telegraphed  the  needed  order.  Fisk  is  authority  for  the  statement  that 
Eimber,  who  had  failed,  sent  word  to  Washington  of  the  situation. 


BLACK  FRIDAY 


229 


Back  to  the  Gold  Room  ran  the  dazed  subordinate,  content  to  obey, 
and  ignorant  that  he  was  working  his  own  ruin.  But  the  throng  that 
gathered  about  the  fountain  was  at  last  beyond  his  control.  Down  went 
the  premium  while  he  fatuously  bellowed,  “160  for  any  part  of  $5,000,000.” 
Some  few  risked  the  chance  of  selling  him  gold.  James  Brown, 
for  instance,  sold  him  $2,000,000  more.  But  to  most  of  the  ^Thave  ^ 
brokers  he  was  simply  a  man  crazed  by  excitement,  and  they  his  mind, 
swept  his  bids  aside  as  they  drove  the  price  of  the  metal  lower, 
with  pent-up  fury  bred  of  torture.  In  fifteen  minutes  the  premium  had 
fallen  to  33,  and  a  handful  of  Speyers’  associates  were  dragging  him  from 
the  floor,  his  preposterous  bid  still  gurgling  in  his  throat.  The  battle  was 
over.  The  exhausted  mob  of  brokers  and  speculators  poured  out  into  the 
open  air,  overcome  with  disaster  or  exulting  over  imaginary  gains. 


Gould’s  bank 
under  fire. 


bull  leaders  had  been  already  handicapped  by  Government  inter- 
K  1  j'erence  in  another  channel.  They  had  joined  hands  with  Tweed 
and  other  members  of  the  Tammany  ring  that  summer  to  purchase 
the  control  of  the  Tenth  National  Bank.  They  had  relied  upon  this  bank 
to  aid  them  by  grossly  overcertifying  their  checks,  and  had  learned  in  the 
morning  that  it  was  too  dangerous  to  continue  the  practice 
for  the  time  being,  as  National  Bank  examiners  had  come  to 
the  city  and  were  working  over  the  institution’s  books. 

Still,  the  great  resources  of  Mr.  Gould  and  his  friends  would  have  enabled 
them  to  overcome  this  difficulty  —  aided  as  they  were  by  the  right  to 
demand  increasing  cash  margins  with  every  advance  in  the  metal’s  price 
from  all  to  whom  they  had  loaned  their  gold  —  if  it  had  not  been  for 
Boutwell’s  telegram.  The  mere  sale  of  $4,000,000  could  not  break  the 
market.  It  was  the  moral  effect  of  the  Secretary’s  action  —  ordered,  of 
course,  by  the  President — which  told  the  Street  that  the  Government 
would  take  all  needed  steps  to  safeguard  the  country. 

The  existence  of  a  corner  of  any  sort  in  Wall  Street  tends  to  produce  a 
decline  in  the  prices  of  securities  at  large,  not  only  because  its  moral  effect 
is  calamitous,  but  because  the  corner’s  victims  are  obliged  promptly  to 
liquidate  their  general  holdings.  This  week  showed  no  exception  to  the 
rule,  although  the  Stock  Exchange  was  not  such  a  scene  of  terror  and  con¬ 
fusion  as  was  the  Gold  Room.  Black  Friday  would  no  doubt 
have  been  marked  by  much  greater  heaviness  in  the  stock  ®to,ck  pnc®a  , 

}  doclin©  m  Black 

market  than  was  actually  shown  if  a  decline  of  several  days  Friday  week, 
previous  had  not  already  shaken  out  weak  holders  to  a 
considerable  extent.  Wednesday,  for  instance,  had  witnessed  a  panic  in 
Vanderbilt  shares.  New  York  Central,  which  closed  in  the  Street  on 


230 


THE  NEW  YORK  STOCK  EXCHANGE 


Monday  at  201%  bid,  and  on  Tuesday  at  198%  bid,  descended  to  176  — one 
account  makes  it  174% — while  Hudson  River,  which  closed  on  Monday  at 
179%,  fell  to  166  cash  on  Wednesday.  The  latter  security  recovered  only 
about  two  points  on  that  day,  while  Central  was  forced  up  to  191,  and 
closed  at  about  186.  But  even  Commodore  Vanderbilt  must  have  had  his 
hands  full  in  supporting  these  issues.  The  following  table  of  final  bids  and 
offers  on  Monday,  September  20th,  and  Black  Friday,  September  24th,  will 
illustrate  the  general  decline : 


Stock.  Monday.  Friday. 

New  York  Central, . 201%-  %  182%— 3 

Hudson, . 179%  -80  164  —8 

Erie, . 39%  -  %  35  -  % 

Reading, . 95%  -  %  94  -  % 

Pacific  Mail, . 75%  -  6  72% — 3 

Lake  Shore, . 97%—  %  92%—  % 

North-Western, . 75%  -  %  72  -  % 

Rock  Island, . 109%-  %  107%-  % 


The  impression  was  general  among  the  crowd  which  poured  out  of  the 
Gold  Room  at  12:30  o’clock  on  Friday  afternoon  that  half  the  houses  in 
Wall  Street  were  insolvent,  and  if  the  usual  criterions  of  solvency  are  the 
test  in  this  case  the  view  was  doubtless  well  founded.  Operators  who  had 
scored  large  paper  profits  in  the  break  decided,  on  sober 
badly ScrTppied.  second  thought,  that  rejoicing  would  be  premature.  Speyers 
had  made  enormous  purchases  since  9  o’clock,  but  not  one  of 
the  sales  to  him  was  worth  the  paper  ticket  it  was  written  on.  “I  bought 
altogether,  that  day,”  said  he,  “over  $26,000,000.  That  was  the 
last  day — the  day  of  judgment.”1  Solid  houses,  like  Brown  Brothers  or 
Duncan,  Sherman  &  Co.,  which  had  thrown  large  sums  of  foreign  gold  upon 
the  market  after  the  break  began,  had  no  means  of  knowing  where  they 
stood ;  and  practically  every  man  who  emerged  with  throbbing  pulses  and 
whirling  brain  from  the  pandemonium  about  Cupid’s  fountain  was  as  much 
in  ignorance  of  his  position. 

“I  have  made  $50,000  on  the  fall,”  said  a  grizzly-faced  operator,  “and 
would  take  a  quarter  of  it  to-day  rather  than  run  the  risks  of  to-morrow.” 
“Yes,”  said  a  young  but  heavy  operator,  “I  made  $100,000  in  a  jiffy,  but 
I  would  like  to  take  ten  per  cent,  of  it  for  my  chance  of  the  whole.  I  don’t 
suppose  I  shall  ever  get  a  copper  of  it — the  parties  will  turn  out  to  be  all 
broke.”2 

A  few  moments  after  the  bursting  of  the  bubble  the  office  of  William 
Heath  &  Co.,  at  No.  15  Broad  Street,  was  besieged  by  a  mob  of  desperate 
men,  goaded  too  far  to  remember  the  claims  of  law,  and  wild  for  a  chance  to 
wreak  bodily  vengeance  on  those  at  whose  hands  they  had  suffered.  The 

1  Testimony  of  Albert  Speyers  before  the  Garfield  Committee. 

2  New  York  Times,  September  25,  18G9. 


BLACK  FRIDAY 


231 


memory  of  former  losses  stirred  the  mob’s  heated  blood  and  they  made 
threats  against  not  only  the  workers  of  their  present  woe  but  all  the  old 
allies  of  the  clique.  Demands  that  Judge  Barnard  be  hanged  testified  to 
their  feeling  and  seemed  to  indicate  a  well-grounded  belief  that  this  handy 
judicial  auxiliary  would  soon  respond  to  another  call  for  his  services.  It 
was  no  time  for  the  sovereigns  of  Erie  to  dally.  Their  assailants  were 
clamoring  for  admittance,  and  Heath’s  guards  were  not  equal  to  the  task 
of  denying  it.  All  through  that  morning,  while  the  unfortunate  Speyers  was 
working  ruin  in  the  Gold  Room,  Mr.  Gould  had  been  settling  outstanding 
contracts.  He  had  a  special  group  of  agents  engaged  in  impressing  upon 
the  bears  a  conviction  that  they  must  settle  soon  if  they  would  escape  at  all. 
This  work  was  under  the  care  of  his  partner,  Henry  Nelson  Smith,  and  had 
gone  on  with  much  success,  contracts  to  the  amount  of  nearly  $20,000,000 
having  been  settled  at  about  148  or  150.  All  chance  of  pursuing  negotia¬ 
tions  further  was  ended,  now  that  Broad  Street  swarmed  with  an  angry 
mob,  and  Messrs.  Gould,  Fisk,  and  Smith  made  haste  to  leave  the  scene. 
One  by  one  they  vacated  the  office  through  a  back  passage  and  repaired  to 
safer  quarters. 

These  were  found  in  the  neighboring  offices  of  Smith,  Gould,  Martin 
&  Co.,  at  No.  11  Broad  Street,  where  a  cohort  of  armed  retainers  had  been 
held  in  readiness  to  guard  the  financiers  in  the  event  of  any  disagreeable 
contingency.  The  firm’s  sagacity  had  not  stopped  here.  Foreseeing  that 
disputants  with  whom  it  would  be  inopportune  to  settle  at 
once  might  levy  on  the  contents  of  their  office,  they  had  sheriff  and 
early  provided  a  sheriff  to  guard  it.  Thus  civil  law  and  mob  dique^ 

law  were  neither  to  be  feared.  Later  in  the  day — though  employ. 

Mr.  Gould  may  have  known  nothing  of  it — Inspector  General 
McQuade,  of  the  National  Guard,  told  a  Brooklyn  regiment  to  hold  itself  in 
readiness  to  march,  if  need  be,  upon  Wall  Street. 

It  took  the  Broad  Street  crowd  but  little  time  to  discover  which  way 
the  objects  of  their  pursuit  had  flown,  and  they  now  besieged  the  firm’s 
offices,  demanding  admittance,  and  increasing  their  importunities  at  each 
refusal  of  the  hired  guardians.  Men  shouted  to  one  another  that  the  house 
had  failed.  Rufus  Hatch,  a  friend  of  the  clique,  stood  in  front  of  the 
entrance  and  theatrically  exclaimed,  “I’ll  bet  $1,000  to  $500  that  the 
firm  is  sound!”  “That’s  cheap  whitewash,”  said  one  bystander;  but  no 
one  took  the  bet.  Perhaps  the  crowd  had  had  enough  of  speculation  for 
one  day.  At  all  events  they  refused  to  go  while  there  was  any  chance  of 
satisfaction.  Finally,  at  5  o’clock  in  the  afternoon,  Fisk  decided  to  show 
himself  to  the  malcontents  and  endeavored  to  pacify  them,  his  partners,  no 
doubt,  acquiescing  in  the  plan.  Scarcely  had  he  appeared  on  the  entrance 
steps  when  one  furious  victim — an  Englishman,  it  is  said  —  sprang  up  from 


232 


THE  NEW  YORK  STOCK  EXCHANGE 


the  crowd  and  dealt  him  a  smashing  blow  in  the  face.  Fisk  retired  at  once 
and  announced  that  moral  suasion  was  out  of  the  question.  A  short  while 
later  Mr.  Gould  and  he  took  their  departure  through  a  back  exit  and  made 
their  way  up  town. 

Before  they  left,  however,  there  occurred  an  incident  which  is  too 
striking  to  be  overlooked.  Speyers  had  discovered,  just  after  his  collapse, 
upon  seeing  his  principals,  to  whom  he  had  continual  access,  that  they 
intended  to  repudiate  his  frenzied  dealings.  Later  in  the  afternoon  he  had 
returned  to  the  Gold  Room,  announced  his  suspension,  and  proclaimed  Fisk 
and  Belden  as  his  principals,  and  then  had  taken  Mr.  Brown  to  them  with 
the  information  that  the  banker  had  sold  him  $7,000,000  of 
Speyers  A11  ^  gold  for  their  account.  Mr.  Brown  wTas  obliged  to  leave  them, 
after  threatening  “to  have  their  heads,”  and  it  is  uncertain 
whether  they  ever  paid  him  anything.  But  to  Speyers,  when  he  came  again 
alone,  Mr.  Fisk  made  a  striking  proposition,  which  was  in  effect  that  he 
should  quietly  stand  by  the  clique  and  accept  a  consideration  to  relieve 
them  of  responsibility  for  his  transactions.  “  Mr.  Speyers,”  said  Fisk,  “you 
can  ask  anything  of  us — money,  capital,  or  service.  What  do  you  care 
about  the  brokers?  You  have  a  family  of  children.  The  brokers  are  all 
rascals.” 

This  offer  was  supplemented  by  a  proposition  from  one  of  the  clique’s 
lawyers,  who  suggested  a  payment  of  $200,000,  which  Speyers  refused.  In 
his  sworn  testimony  before  the  Garfield  Committee  he  declared  that  he 
never  even  received  his  commissions.  The  simple  quality  of  his  mind  was 
indicated  by  his  explanation  of  his  course  in  following  his  orders  so  blindly. 
“Their  transactions,” said  he,  “were  all  so  mysterious  that  even  when  they 
bought  gold  at  160,  while  it  was  selling  for  140, 1  thought  it  quite  natural 
for  them.  I  thought  that  probably  they  knew  something  about  it.” 


!3§2|nHE  Tenth  National  Bank  had  to  face  a  severe  run  that  afternoon, 
with  its  doors  besieged  by  a  mob  of  depositors  who  apprehended 
that  it  would  fail,  but  it  weathered  the  storm.  The  Gold  Exchange 
Bank,  of  which  H.  M.  Benedict  was  president,  was  in  great  difficulties,  and 
by  reason  of  the  failure  of  a  number  of  firms  found  its  transactions 
impossible  to  clear.  Thursday’s  clearances  had  amounted  to  $324,524,000, 
and  it  is  estimated  that  those  of  Friday  would  have  reached  a  total  of 
$500,000,000,  had  they  ever  taken  place.  The  Gold  Board  met  on  Satur¬ 
day,  only  to  adjourn  till  Monday.  On  Wednesday  the  Gold  Exchange 
Bank,  which  had  paid,  at  its  own  risk,  and  in  order  to  check  the  growing 
list  of  failures,  a  portion  of  the  balances  due,  was  put  into  the  hands  of  a 
receiver,  at  the  application  of  the  Gould  party,  by  Judge  Cardozo,  who  also 


BLACK  FRIDAY 


233 


granted  an  injunction  preventing  the  Gold  Exchange  from  selling  out  the 
clique’s  gold  “under  the  rule,”  or  taking  any  action  to  protect  its  members 
except  through  the  courts,  and  from  expelling  Henry  N.  Smith.  “  We  have 
to  say  of  Judge  Cardozo,”  remarked  the  New  York  Times 
editorially,  “that  he  has  only  furnished  another  illustration  Gold  Exchange 
of  the  wicked  purposes  to  which  our  judicial  system  may  be  receiverVhands. 
perverted.”  The  clique,  in  fact,  succeeded  in  tying  the  hands 
of  creditors  and  debtors  alike  by  the  aid  of  Tammany  judges,  a  feat  well 
illustrated  by  the  injunction  Barnard  granted'them  against  J ohn  Bonner, 
who  had  sold  gold  to  Speyers.  This  order  actually  prevented  Bonner  from 
taking  any  legal  action  against  them,  otherwise  than  in  defending  a  suit 
brought  against  him  by  Smith,  Gould,  Martin  &  Co.  The  travesty  of 
justice  closely  approached  perfection. 

It  enabled  Smith,  Gould,  Martin  &  Co.  to  effect  advantageous  compro¬ 
mises  with  their  creditors,  in  the  course  of  settlements,  lasting  five  or  six 
weeks,  though  some  litigation  stretched  well  into  the  next  year.  Speyers 
never  paid  anything  on  his  debts.  Fisk  repudiated  every  order  he  had 
given,  and  virtually  escaped  scot  free.  The  clique  cleared  several  millions 
of  profit.  Mr.  Hodgskin,  chairman  of  the  Arbitration  Committee  of  the 
Gold  Exchange,  estimated  that  a  settlement,  including  the  transactions 
of  Speyers  and  other  alleged  agents,  would  have  cost  them  at  least 
$20,000,000. 

The  aftermath  of  the  disaster  must  be  briefly  outlined.  The  Gold 
Exchange,  of  which  the  president  was  Townsend  Cox,  did  not  resume 
dealings  until  Thursday  morning,  September  30th,  the  Stock  Exchange 
having  meanwhile  provided  for  gold  trading  in  the  Long  Room.  A  com¬ 
mittee  of  twenty,  appointed  by  the  Gold  Exchange,  eventually 
effected  a  partial  clearance  on  the  basis  of  a  price  of  135  for  Gathering  of 

A  x  the  pieces. 

gold,  the  closing  quotation  on  Black  Friday,  the  members 
being  instructed  to  settle  the  difference  between  that  price  and  their 
contract  prices  by  private  agreement.  Smith,  Gould,  Martin  &  Co.  made 
frequent  promises  to  send  in  their  sheet,  but  never  did  so.  The  committee 
finally  constructed  a  sheet  for  them  from  the  tickets  presented  by  other 
brokers.  It  showed  that  they  had  contracted  to  receive  $20,630,000  in 
gold,  and  deliver  $7,500,000  in  gold,  leaving  a  balance  of  $13,130,000  to 
be  paid  for  by  them  at  135.  It  has  been  already  seen  that  they  got  out  of 
their  difficulties  by  private  settlements. 

Individual  deaths1  and  ruin,  and  the  failure  of  a  long  list  of  firms, 
marked  the  passage  of  this  financial  cyclone.  The  most  notable  fall  was 
that  of  the  celebrated  house  of  Lockwood  &  Co.,  on  September  29th. 

1  Solomon  Mahler,  a  ruined  broker,  killed  himself  with  a  pistol  shot,  in  bed  early  on  the  morning  of  the 
25th,  the  day  after  Black  Friday. 


234 


THE  NEW  YORK  STOCK  EXCHANGE 


Commodore  Vanderbilt  was  in  the  Street  that  day,  having  supported 
Central  all  through  the  season  of  distress,  and  is  understood  to  have  taken 
70,000  shares  of  the  Lake  Shore  stock  off  their  hands  at  a 
price  thoroughly  satisfactory  to  himself.  The  Erie-Tammany 
clique  also  scored  certain  gains,  the  amount  of  which,  though 
plainly  far  less  than  at  one  time  seemed  within  its  reach,  was 
never  credibly  made  known.  And  so  the  gold  comer  of  1869  entered  into 
history.1 

1  The  following  poem,  written  by  a  member  of  the  Stock  Exchange  on  the  evening  of  Black  Friday, 
appeared  on  the  editorial  page  of  the  New  York  Tribune,  September  28,  1869: 

ISRAEL  FREYER’S  BID  FOR  GOLD. 


Commodore 
Vanderbilt’s 
good  fortune. 


Zounds !  how  the  price  went  flashing  through 
Wall  street,  William,  Broad  street,  New  ! 

All  the  specie  In  all  the  land 
Held  in  one  ring  by  a  giant  hand — 

For  millions  more  it  was  ready  to  pay, 

And  throttle  the  Street  on  hangman’s-day. 

Up  from  the  Gold  Pit’s  nether  hell, 

While  the  Innocent  fountain  rose  and  fell, 

Loud  and  higher  the  bidding  rose, 

And  the  bulls,  triumphant,  faced  their  foes. 

It  seemed  as  if  Satan  himself  were  in  it : 

Lifting  it — one  per  cent,  a  minute — 

Through  the  bellowing  broker,  there  amid. 

Who  made  the  terrible,  final  bid ! 

High  over  all,  and  ever  higher, 

Was  heard  the  voice  of  Israel  Freyer, — 

A  doleful  knell  in  the  storm-swept  mart, — 

“Five  millions  more  !  and  for  any  part 
“I’ll  give  One  Hundred  and  Sixty !” 

Israel  Freyer — the  Government  Jew — 

Good  as  the  best — soaked  through  and  through 
With  credit  gained  in  the  year  he  sold 
Our  Treasury’s  precious  hoard  of  gold  ; 

Now  through  his  thankless  mouth  rings  out 
The  Leaguers’  last  and  cruellest  shout  1 
Pity  the  shorts?  Not  they  indeed. 

While  a  single  rival’s  left  to  bleed  ! 

Down  come  dealers  in  silks  and  hides, 

Crowding  the  Gold  Room’s  rounded  sides. 
Jostling,  trampling  each  other’s  feet, 

Uttering  groans  in  the  outer  street ; 

Watching,  with  upturned  faces  pale, 

The  scurrying  index  mark  its  tale  ; 

Hearing  the  bid  of  Israel  Freyer, — 

That  ominous  voice,  would  it  never  tire? 
“Five  millions  more  !— for  any  part, 

(If  It  breaks  your  firm.  If  it  cracks  your  heart,) 
I’ll  give  One  Hundred  and  Sixty.” 

One  Hundred  and  Sixty  !  Can’t  be  true  ! 

What  will  the  bears-at-forty  do? 

How  will  the  merchants  pay  their  dues? 

How  will  the  country  stand  the  news? 

What'll  the  banks — but  listen  !  hold  ! 

In  screwing  upward  the  price  of  gold 
To  that  dangerous,  last,  particular  peg. 

They  had  killed  their  Goose  with  the  Golden  Egg  ! 
Just  there  the  metal  came  pouring  out, 

All  ways  at  once,  like  a  water-spout, 

Or  a  rushing,  gushing,  yellow  flood, 

That  drenched  the  bulls  wherever  they  stood  ! 
Small  need  to  open  the  Washington  main. 

Their  coffer-dams  were  burst  with  the  strain  ! 

It  came  by  runners,  it  came  by  wire, 

To  answer  the  bid  of  Israel  Freyer, 

It  poured  in  millions  from  every  side. 

And  almost  strangled  him  as  he  cried, — 

“I’ll  give  One  Hundred  and  Sixty  !” 

I.ike  Vulcan  after  Jupiter’s  kick. 

Or  the  aphoristical  rocket’s  stick, 

Down,  down,  down,  the  premium  fell. 

Faster  than  this  rude  rhyme  can  tell ! 

Thirty  per  cent,  the  index  slid, 

Yet  Freyer  still  kept  making  his  bid 


“One  Hundred  and  Sixty  for  any  part !" 

- — The  sudden  ruin  had  crazed  his  heart. 
Shattered  his  senses,  cracked  his  brain. 

And  left  him  crying  again  and  again, — 

Still  making  his  bid  at  the  market’s  top 
(Like  the  Dutchman’s  leg  that  never  could  stop,) 
“One  Hundred  and  Sixty — Five  Millions  more  1” 
TUI  they  dragged  him,  howling,  off  the  floor. 

The  very  last  words  that  seller  and  buyer 
Heard  from  the  mouth  of  Israel  Freyer — 

A  cry  to  remember  as  long  as  they  live — 

Were,  “I’ll  take  Five  Millions  more  1  I’ll  give, — 
I’ll  give  One  Hundred  and  Sixty  1” 

Suppose  (to  avoid  the  appearance  of  evil) 

1  here's  such  a  thing  as  a  Personal  Devil, 

It  would  seem  that  his  Highness  here  got  hold, 
For  once,  of  a  bellowing  Bull  in  Gold  ! 

Whether  bull  or  bear,  it  wouldn’t  much  matter 
Should  Israel  Freyer  keep  up  this  clatter 
On  earth  or  under  It  (as,  they  say. 

He  is  doomed)  till  the  general  Judgment  Day, 
When  the  Clerk,  as  he  cites  him  to  answer  for’t. 
Shall  bid  him  keep  silence  in  that  Court ! 

But  it  matters  most,  as  it  seems  to  me. 

That  my  countrymen,  great,  and  strong  and  free, 
So  marvel  at  fellows  who  seem  to  win. 

That  if  even  a  Clown  can  only  begin 
Bv  stealing  a  railroad,  and  use  its  purse 
For  cornering  stocks  and  gold,  or — worse — 

For  buying  a  Judge  and  Legislature, 

And  sinking  still  lower  poor  human  nature, 

The  gaping  public,  whatever  befall, 

Will  swallow  him,  tandem,  harlots,  and  all  ! 

While  our  rich  men  drivel  and  stand  amazed 
At  the  dust  and  pother  his  gang  have  raised, 

And  make  us  remember  a  nursery  tale 
Of  the  four-and-twenty  who  feared  one  snail. 

What's  bred  in  the  bone  will  breed,  you  know ; 
Clowns  and  their  trainers,  high  and  low, 

Will  cut  such  capers,  long  as  they  dare. 

While  honest  Poverty  says  its  prayer. 

But  tell  me  what  prayer  or  fast  can  save 
Some  hoary  candidate  for  the  grave. 

The  market's  wrinkled  Giant  Despair, 

Muttering,  brooding,  scheming  there, — - 
Founding  a  college  or  building  a  church 
Lest  Heaven  should  leave  him  In  the  lurch ! 
Better  come  out  in  the  rival  way, 

Issue  your  scrip  in  open  day, 

And  pour  your  wealth  in  the  grimy  fist 
Of  some  gross-mouthed,  gambling  pugilist ; 

Leave  toll  and  poverty  where  they  lie. 

Pass  thinkers,  workers,  artists,  by, 

Your  pot-house  fag  from  his  counters  bring 
And  make  him  into  a  Railway  King! 

Between  such  Gentiles  and  such  Jews 
Little  enough  one  finds  to  choose  : 

Either  the  other  will  buy  and  use, 

Eat  the  meat  and  throw  him  the  bone. 

And  leave  him  to  stand  the  brunt  alone. 

.the  tempest  come,  that’s  gathering  near. 
And  give  us  a  better  atmosphere ! 


E.  C.  S. 


XVII 

THE  ENDING  OF  TWO  NOTABLE  CAREERS 

ITH  the  period  of  the  great  gold  corner  of  1869,  and  until 
his  death  at  the  hands  of  an  assassin  two  years  and  a 
quarter  later,  Janies  Fisk,  Jr.,  was  undeniably  the  most 
picturesque  and  spectacular  figure  in  the  realm  of  specu¬ 
lation.  Always  a  spendthrift,  and  quite  ready  to  scatter 
in  the  form  of  largess  the  riches  which  passed  through  his 
hands,  he  could  not  amass  a  stable  fortune.  Mr.  Gould,  his  associate,  was 
the  real  basis  of  success  in  all  the  schemes  that  Mr.  Fisk  executed  with  such 
daring  and  bluster.  But,  despite  Gould’s  means  and  ability,  it  was  Fisk 
who  captured  the  greater  share  of  public  attention,  and  even  held  a  little 
nook  in  the  public  heart.  The  question  of  character  varies,  like  other 
questions,  with  the  point  from  which  it  is  approached.  Thousands  who 
were  nowise  inclined  to  thread  the  intricacies  of  Mr.  Fisk’s  operations  in  the 
Street,  knew  him  as  a  man  of  striking  and  humorous  speech,  liberal  in  his 
expenditures  and  his  gifts,  easy  to  approach,  and  a  royal  companion  in 
pleasure  seeking.  They  cared  little  how  he  made  his  money,  but  wrere  much 
interested  in  the  methods  he  took  to  get  rid  of  it.  They  dubbed  him 
“Temptation  Jim,”  or  “Prince  Erie,”  laughed  at  his  Admiral’s  uniform 
and  his  malodorous  jests,  and  vowed  that  there  were  many  wrorse  than  Fisk 
who  concealed  their  failings  better.  No  doubt  they  were  right. 

The  brief  era  now  calling  for  discussion  was  as  thoroughly  tinctured 
with  Fisk’s  presence  as  a  glass  of  water  by  a  drop  of  coloring  matter.  He 
had  wound  up  a  sensational,  if  futile,  attempt  to  appropriate  a  railroad 
property  on  the  very  eve  of  the  gold  campaign  described  in  the  preceding 
chapter.  It  is  possible  simply  to  touch  on  the  bare  outlines  of  this  story. 
In  the  early  half  of  1869  the  Albany  &  Susquehanna,  a  railroad  140  miles 
long,  had  been  completed  from  Albany  to  Binghamton — the  latter  point 
being  on  the  Erie  line.  This  little  road  -would  have  been  of  much  value  to 


236 


THE  NEW  YORK  STOCK  EXCHANGE 


the  Erie  as  a  means  of  establishing  a  New  England  connection.  Stock  to 
the  amount  of  only  $2,800,000  was  outstanding,  and  the  so-called  “church 
party”  in  the  Albany  &  Susquehanna  directorate  formed  an  alliance  with 
Fisk  and  Gould  for  purchasing  the  control  of  their  property  and 
The  Albany  &  turning  it  over  to  the  Erie.  Joseph  H.  Ramsey,  president  of 

war.  the  Albany  &  Susquehanna,  the  man  who  originated  and 

carried  through  the  entire  project  for  the  road,  opposed  this 
plan,  and  in  order  to  frustrate  it  induced  a  group  of  his  friends  to  subscribe 
for  9,500  shares  of  new  stock,  upon  which  they  were  able  to  vote  after 
paying  ten  per  cent,  of  their  subscriptions.  To  get  this  ten  per  cent,  in  cash 
for  his  obliging  friends  he  actually  hypothecated  the  road’s  own  equipment 
bonds,  to  the  par  value  of  $150,000,  with  David  Groesbeck,  justifying  his 
audacious  act  by  the  exigencies  of  defence  against  the  Erie  clique. 

Fisk,  who  was  the  active  mover  on  the  part  of  the  Erie  in  this  affair, 
succeeded,  on  August  5,  1869,  with  the  aid  of  the  ever  faithful  Judge 
Barnard,  in  having  the  Albany  &  Susquehanna  put  into  the  hands  of 
himself  and  Charles  Courter  as  receivers.  On  the  same  day 
muddle1" iudlcial  Ramsey  induced  Judge  Peckham,  of  Albany,  to  appoint  a 
Mr.  Pruyn  as  receiver.  A  period  of  disgraceful  legal  complica¬ 
tions,  judicial  warfare,  and  contempt  for  all  the  ordinary  decencies  of 
litigation — such  as  we  have  seen  in  previous  financial  conflicts — was  next 
in  order.  Fisk  attempted  to  take  the  Albany  offices  of  the  road  by  storm 
on  August  7th,  and  was  thrown  out,  with  his  allies,  by  the  employes.  He 
returned,  to  make  an  astonishing  proposition  to  play  a  game  of  “seven- 
up  ”  with  the  superintendent  of  the  Albany  &  Susquehanna  Railroad,  the 
winner  to  take  charge  of  the  road.  This  offer  was  declined.  He  then 
retreated  to  New  York,  to  fortify  himself  with  a  “writ  of  assistance”  and 
various  other  awe-inspiring  court  orders,  while  Mr.  Pruyn  was  doing  some- 
The  struggle  thing  of  the  same  kind  at  Albany.  Before  the  campaign 
culminates  in  a  ended,  the  rival  factions,  supported  by  rival  cohorts  and  borne 
railroad  Gn  rival  trains,  met  in  a  head-on  collision  just  outside  a 

tunnel  near  Binghamton,  and,  though  no  one  was  injured,  the 
excitement  was  such  that  the  militia  had  to  be  called  out,  and  Governor 
Hoffman  took  possession  of  the  road.  A  disgraceful  scene  on  election  day, 
September  7th,  marked  by  the  arrest  of  Ramsey  and  the  nominal  victory 
of  the  Erie  faction,  was  followed  by  court  proceedings  at  Rochester,  which 
ultimately  wound  up  the  fiasco.  The  Albany  &  Susquehanna  was  restored 
to  the  Ramsey  party,  and  in  February,  1870,  leased  to  the  Delaware  & 
Hudson  Canal  Company.1 

1  Charles  Francis  Adams,  Jr.,  in  an  article  printed  in  the  North  American  Review  for  April,  1871,  and 
Jeremiah  S.  Black,  ex- Attorney-General  of  the  United  States,  have  each  left  an  interesting  account  of  this 
escapade  in  finance.  Mr.  Adams  denounces  the  Erie  party  and  Mr.  Black  excoriates  Ramsey.  Both  views 
appear  to  be  well  supported. 


237 


THE  ENDING  OF  TWO  NOTABLE  CAREERS 

jggSgjHE  year  1870  was  marked  by  the  prosecution  of  two  suits,  in 
which  Fisk  was  the  plaintiff,  and  which  added  to  his  notoriety 
although  fruitlessly  depleting  his  bank  account.  One  of  these 
had  been  started  in  the  previous  year.  It  was  what  is  now  termed 
a  “ strike”  —  a  species  of  blackmail  conducted  through  an  action  at 
court,  with  which  the  attorneys  for  all  large  corporations  are  familiar. 
Fisk  claimed  to  have  made  four  subscriptions,  of  5,000  shares  each, 
to  the  stock  of  the  Union  Pacific  Railroad  Company,  and  sued  to  es¬ 
tablish  his  claim,  incidentally  securing  the  appointment  of  William  M. 
Tweed,  Jr.,  the  son  of  the  Tammany  boss,  as  temporary  receiver  of 
the  road. 

The  Union  Pacific  was  already  in  the  control  of  the  famous  Credit 
Mobilier  of  America,1  a  Pennsylvania  corporation,  of  which  Sidney  Dillon 
was  the  president  and  Thomas  C.  Durant  the  backbone.  The  scandals 
which  later  tainted  its  name  were  forecasted  in  the  rumor  of  the  day,  and 
Fisk  knew  the  weak  points  at  which  to  direct  his  attack.  But  it  was  not 
successful. 

The  Union  Pacific  and  Central  Pacific  roads  had  received,  by  Acts  of 
Congress  in  1862  and  1864,  subsidies  of  United  States  six  per  cent,  gold 
bonds  at  the  rate  of  $16,000  a  mile  from  the  Missouri  River  to  the  base  of 
the  Rocky  Mountains,  $48,000  a  mile  for  300  miles  through  these  moun¬ 
tains,  $32,000  a  mile  between  the  Rockies  and  the  Sierra  Nevadas,  and 
$16,000  a  mile  west  of  the  Sierra  Nevadas.  The  Central 
Pacific  ran  eastward  for  881  miles,  exclusive  of  branches,  from  Building  of  the 
Sacramento,  California  (which  was  connected  with  San  Fran-  folds Pacific 
cisco  by  another  road),  to  Promontory  Summit,  five  miles 
west  of  Ogden,  Utah,  where  the  junction  was  made  with  the  Union  Pacific, 
running  from  Council  Bluffs,  Iowa.  The  latter  road  was  1,029  miles  long. 
Work  was  commenced  on  both  systems  in  1863,  and  they  were  united  in 
May,  1869. 

The  Government  bond  subsidies  were  liens  upon  the  roads,  but 
public  lands  to  the  extent  of  about  19,000,000  acres  were  turned 
over  to  them  free  and  clear.  This  national  aid  was  extended  upon 
the  theory  that  a  transcontinental  road  would  be  of  great  value  to  the 


1  The  Credit  Mobilier  of  America  waa  composed  of  a  group  of  Union  Pacific  directors,  and  took  over 
from  dummies  the  contracts  for  constructing  the  road  which  the  directors  executed.  In  short,  they  used 
their  fiduciary  position  to  enrich  themselves  as  individuals,  and  as  the  contracts  were  grossly  extravagant 
they  made  millions  by  the  process.  Prominent  in  the  Credit  Mobilier  was  Oakes  Ames,  who  individually 
carried  out  the  largest  construction  contract.  Mr.  Ames  was  a  member  of  Congress,  and  distributed  large 
blocks  of  Union  Pacific  stock  among  his  fellow  members  on  terms  which  made  the  process  tantamount  to 
bribery.  The  object  was  to  secure  favorable  legislation  on  behalf  of  the  road.  In  the  report  of  the  United 
States  Pacific  Railway  Commission,  transmitted  to  Congress  by  President  Cleveland  on  January  17, 1888, 
it  is  shown  that  the  Credit  Mobilier  of  America  had  made  a  net  profit  on  the  so-called  Ames,  Hoxie,  and 
Davis  contracts  of  $43,929,328.34,  in  bonds  and  stock,  the  equivalent  of  $23,366,319.81  in  cash.  The 
legitimate  expenses  of  building  the  road  should  not  have  exceeded  the  amount  of  the  first  mortgage 
bonds.  Oakes  Ames  and  James  Brooks,  of  New  York,  were  both  expelled  from  the  House  of  Representatives 
for  their  connection  with  the  bribery. 


238 


THE  NEW  YORK  STOCK  EXCHANGE 


nation  in  time  of  war.  Similar  assistance  was  also  extended  by  the 
Government  to  the  Northern  Kansas  and  Western  Pacific  roads,  and  the 
Sioux  City  &  Pacific. 

William  E.  Dodge,  Marshall  0.  Roberts,  Moses  Taylor,  Samuel  J.  Tilden, 
August  Belmont,  General  John  A.  Dix,  Thomas  C.  Durant,  Thurlow  Weed, 
William  R.  Travers,  and  Leonard  W.  and  Addison  G.  Jerome  were  among 
the  first  subscribers  to  the  Union  Pacific. 

The  animus  of  the  Fisk  suit  was  thoroughly  disclosed  by  a  joint 
affidavit,  in  which  several  of  the  directors  joined,  in  reply  to  “  Prince  Erie’s  ” 

charges.  The  statements  it  attributed 
to  Fisk  bear  the  stamp  of  truth. 
Sidney  Dillon  swore  to  a  conversation 
he  had  with  Fisk  in  which  the  Erie  man 
admitted  that  his  “subscription”  had 
been  made  for  other  persons.  John  B. 
Alley  swore  to  an  admission  by  Fisk 
that  he  aimed  to  get  $100,000  in  black¬ 
mail  for  stopping  his  suit.  There  is 
good  evidence  to  the  effect  that  Fisk 
never  paid  a  cent  on  his  alleged  sub¬ 
scriptions.  His  attempt  at  blackmail 
collapsed  in  February,  1871,  when  J udge 
Nelson  decided  the  case  in  favor  of  the 
Union  Pacific  directors.  His  other  liti¬ 
gation  of  this  period  was  directed  at 
Commodore  Vanderbilt,  and  was  an  outgrowth  of  the  famous  settlement 
which  concluded  the  first  Erie  conflict  of  1868.  This  action  Fisk  prose¬ 
cuted,  with  Gould’s  aid,  on  behalf  of  the  Erie  road.  They  had  agreed  with 
Vanderbilt  to  definite  terms,  which  we  need  not  reiterate.  The 
Another  agreement  was  sufficiently  outrageous,  but  it  had  made  pos¬ 

sible  the  truce,  and  this  of  itself  should  have  estopped  Messrs. 
Gould  and  Fisk  from  bringing  an  action  to  overthrow  it.  The 
suit  came  to  trial  in  March,  1870,  before  Judge  Barnard.  The  emotions  of 
this  judicial  luminary,  called  upon  to  decide  a  dispute  between  his  old  bene¬ 
factor,  V anderbilt,  on  the  one  side,  and  his  loyal  friends,  Fisk  and  Gould,  on 
the  other,  may  be  left  to  the  imagination  of  the  reader.  His  Honor  showed 
plainly  his  wish  to  be  tender  of  the  feelings  of  both  parties,  if  unable  to 
gratify  more  than  one  by  his  decision.  When  Fisk  was  on  the  stand,  and 
the  Vanderbilt  counsel  asked  him  about  the  capitalization  of  the  Erie, 
Barnard  excused  him  from  replying,  since  to  do  so  might  “be  furnishing 
information  to  those  who  were  anxious  to  prosecute  the  company.”  Fisk 
added  to  the  entertaining  character  of  these  proceedings  by  voluble  and 


THOMAS  CLARK  DURANT. 


unsavory 

lawsuit. 


THE  ENDING  OF  TWO  NOTABLE  CAREERS 


239 


pungent  testimony.  He  said  that  he  dated  his  gray  hairs  from  the  time  of 
the  infamous  agreement  of  1868,  and  related,  with  great  detail,  how  he  had 
at  last  reluctantly  consented  to  the  schemes  of  the  wicked.  “After  signing 
one  paper,”  said  he,  “I  signed  every  paper  that  came  before  me,  for  I  knew 
the  devil  had  got  me.” 

Judge  Barnard,  responding  to  a  process  of  reasoning  we  need  not 
pretend  to  understand,  dismissed  the  suit  against  Vanderbilt  on  March 
27,  1871.  It  will  be  recalled  that  the  disputed  agreement  had  given  the 
Commodore  $1, 000, 000  in  cash,  as  a  little  douceur,  out  of  the  Erie  funds. 
David  Dudley  Field,  counsel  for  the  Erie,  made  bold  to  ask  if  Vanderbilt 
had  a  right  to  it.  “I  think  in  compromising  he  had  a  right,”  replied  his 
Honor,  “to  receive  such  a  sum  as  would  compensate  him  for  the  trouble  he 
had  taken.” 


HHE  most  startling  speculative  movement  of  1871  was  one  with  which 
the  Gould-Fisk-Tammany  clique  had  nothing  to  do. 

The  Rock  Island  corner  resulted  in  disaster  to  its  The  Roct  Mynd 

corner  of  18/1. 

chief  engineer,  William  Searle  Woodward,  at  the  instant 

when  it  had  almost  attained  success.  Its  completion  depended  upon  a  loan 

of  $250,000,  which  was  promised  to  Woodward  and  never  paid. 

In  preceding  pages  it  has  been  seen  that  Woodward  wras  associated 
with  Gould  in  the  early  stages  of  the  gold  movement  in  1869,  but  liquidated 
his  holdings  of  gold  well  in  advance  of  Black  Friday.  It  was  his  practice 
to  keep  in  his  employ  at  Washington  a  confidential  agent,  who  regu¬ 
larly  sent  him  information  of  value  to  his  speculative  enterprises.  W ood- 
ward  was  born  in  Haverhill,  New  Hampshire,  April,  1825, 
and  as  a  young  man  engaged  in  the  cotton  business  in  New  wmiam  Searie 
Orleans.  Later  he  entered  business  in  Chicago,  and  shortly  uXcky^uthor. 
prior  to  the  commencement  of  the  Civil  War  he  came  to  New 
York  and  began  operating  in  Wall  Street.  He  failed  three  times  before 
becoming  widely  known  in  this  city,  but  each  time  went  vigorously 
to  work  rehabilitating  his  fortunes,  and  at  length  amassed  about 
$3,000,000.  His  attorney  advised  him,  when  his  career  was  at  its 
height,  to  make  a  trust  deed  of  $1,000,000  worth  of  United  States 
sixes  to  his  wife,  insuring  prosperity  for  the  balance  of  his  days ;  but 
he  was  too  confident  of  his  prowess  to  take  the  advice.  He  dealt  con¬ 
tinually,  often  handling  50,000  shares  in  one  day’s  trading,  and  his 
reputation  grew.  Although  essentially  a  domestic  man,  he  was  a 
liberal  spender  of  his  means,  a  fact  instanced  by  the  lunch  club  he 
formed  with  John  B.  Trevor,  Charles  A.  Lamont,  and  the  famous 
stutterer  and  wit,  William  R.  Travers.  These  four  men  had  a  room 


240 


THE  NEW  YORK  STOCK  EXCHANGE 


“The  lunch 
account.” 


at  Dehnonico’s  set  apart  for  their  use,  with  a  table  bountifully  spread  each 
day  from  11  a.  m.  till  3  p.  m.  They  made  it  a  practice  to  invite  to  luncheon 
the  prominent  public  men  who  visited  this  city,  and  paid  the  expenses  of 
their  unique  club  by  speculations  in  the  Street  “for  the  lunch  account.” 
Any  one  of  the  four  had  the  right  to  buy  or  sell  for  this  account,  and  any 
one  of  his  associates  might  close  at  pleasure  a  deal  which  he  had  under¬ 
taken.  They  were  able  to  preserve  good  feeling  through  the  continuance  of 
this  remarkable  arrangement,  which  in  one  year  cost  the  astounding  amount 
of  $26,000.  Trevor,  Lamont,  and  Travers  consumed  a  fair  quantity  of  good 
wine  at  the  expense  of  the  lunch  account,  and  as  Woodward 
was  a  total  abstainer  he  was  compensated  for  their  indulgence 
by  getting  a  hamper  of  fine  fruits  daily  for  the  benefit  of  his 
family.  He  was  a  man  of  markedly  charitable  tendencies,  and  his  benefac¬ 
tions  were  widespread  and  were  quietly  conferred.  When  the  final  crash 
came,  a  poor  Mississippi  clergyman,  to  whose  church  Woodward  had  once 
contributed  $250,  read  in  the  newspapers  of  the  operator’s  fall,  and  sent 
him  a  letter,  placing  at  his  disposal  the  sum  of  $300,  which  he  had  saved  in 
the  course  of  years  of  labor  in  his  pastorate. 

The  shrewdness  of  this  determined  speculator  may  be  illustrated  by  an 
incident  known  to  but  few  of  his  acquaintances.  He  had  at  one  time  accu¬ 
mulated  a  good  many  thousand  shares  of  a  certain  stock,  and  a  clique  of 
outsiders  asked  to  participate  in  his  venture.  Their  request  was  denied, 
and  they  revenged  themselves  by  bribing  a  young  clerk  in  the  office  of  his 
brokers,  Marvin  Brothers  &  Co.,  and  getting  from  this  lad  a  daily  report  of 
Woodward’s  transactions,  on  which  they  gauged  their  own  purchases. 
Mr.  Woodward  had  some  occasion  to  suspect  treachery,  and  employed  a 
private  detective  to  watch  his  brokers’  offices.  The  detective  noticed  that 
the  lad  in  question  regularly  went  away  with  a  package  of  papers  after  the 
market  was  over  for  the  day,  saw  him  deliver  his  burden  to  another  boy, 
and  traced  the  second  lad  to  the  broker’s  office  in  which  the  plotters  made 
their  headquarters.  When  the  spy  reported  his  intelligence  Mr.  Woodward 
instructed  his  own  broker  to  keep  his  account  in  a  private  set  of  books,  but 
„  .  to  have  a  series  of  fictitious  transactions,  supposedly  heavy 

Concerning  .  7  L  1  d 

those  who  purchases,  entered  in  the  books  which  came  under  the  eye  of 

digged  a  pit  the  boy  who  had  turned  traitor.  In  the  course  of  the  next 
and  fell  therein.  jew  days  the  clique,  relying  on  what  they  believed  to  be  good 

information,  bought  the  stock  heavily,  and  Woodward  sold  them  all  his 
holdings  at  his  own  price. 

For  several  years  Mr.  Woodward  had  been  a  large  owner  of  stock  in 
the  Chicago,  Rock  Island  &  Pacific  Railroad  Company,  which  then  con¬ 
trolled  less  than  six  hundred  miles  of  road,  lying  wholly  in  Iowa  and  Illinois, 
and  had  a  capital  stock  of  $17,000,000,  and  from  1860  till  1871  had  been 


THE  ENDING  OF  TWO  NOTABLE  CAKEERS 


241 


paying  eight  per  cent.  He  was  an  enthusiastic  believer  in  Rock  Island’s 
future.  In  May,  1871,  he  was  about  to  retire  from  active  life,  when  Frank 
Work,  then  a  special  partner  in  the  Stock  Exchange  house  of  Scott,  Strong 
&  Co.,  invited  him  to  join  a  pool  in  Rock  Island.  Work  declared  that  his 
firm  had  been  lending  a  large  amount  of  stock  to  Daniel  Drew’s  firm, 
Kenyon,  Cox  &  Co.,  evidently  for  Drew’s  account.  The  opportunity  for  a 
twist  of  the  shorts  was  too  good  to  be  resisted,  and  Woodward 
consented  to  enter  the  pool.  Its  management  was  placed  in  Woodward 
the  hands  of  George  S.  Scott,  of  Scott,  Strong  &  Co.,  and  the  bu^RockPMand. 
stock,  which  had  sold  between  105  and  107  in  January  and 
closed  at  114%  on  May  19th,  was  lifted  to  125  by  June  7th.  On  the  day 
following,  the  Rock  Island  directors  met  in  Chicago  and  disappointed  the 
bulls  by  failing  to  declare  an  extra  dividend.  The  stock  fell  below  121. 

It  was  about  this  time  that  Mr.  Woodward,  on  a  day  when  Scott  was 
absent  at  Long  Branch,  undertook  to  protect  Rock  Island  stock  against  a 
bear  attack,  by  operations  of  his  own.  As  a  result  he  accumulated  a  much 
larger  block  of  Rock  Island  than  he  desired.  Late  in  the  afternoon  he  went 
down  to  Long  Branch  and  saw  Mr.  Scott  at  the  West  End  Hotel.  He 
explained  what  he  had  done  and  asked  his  associate  to  assume  the  day’s 
transactions  on  behalf  of  the  pool.  It  was  manifestly  to  Scott’s  disad¬ 
vantage  to  comply,  and  he  flatly  refused  to  do  so.  But  he  did  consent  to 
tie  up  the  holdings  of  the  pool  —  amounting  to  50,000  shares — for  a  period 
of  sixty  days,  in  order  to  allow  Woodward  to  dispose  of  the  stock  which  he 
had  bought  in  the  pool’s  interest. 

In  agreements  of  this  sort  it  is  the  custom  among  hard-headed  operators 
to  take  memoranda  of  the  numbers  of  those  certificates  which  are  pledged 
to  be  kept  from  the  market,  as  a  guarantee  that  the  pledge 
will  not  be  violated.  But  Woodward  had  never  been  willing  Hj8  t(^°  sreat 
to  use  that  precaution.  He  made  it  a  rule  to  enter  close  human1  nature, 
business  relations  only  with  men  whom  he  trusted,  and  having 
once  established  such  relations  he  put  all  suspicions  aside.  For  the 
remainder  of  his  life  he  believed  that  in  this  case  his  confidence  cost  him 
dearly.  In  fact,  after  the  crash  it  was  public  gossip  in  the  Street  and  the 
newspapers  that  the  pool  had  broken  faith  with  him,  and  it  might  be  diffi¬ 
cult  to  explain  the  course  of  events  upon  any  other  hypothesis.  Woodward 
returned  to  New  York,  and  began,  through  several  brokerage  offices,  a  cam¬ 
paign  of  manipulation.  Strangely  enough,  instead  of  working  his  stock  off, 
he  kept  increasing  his  holdings.  He  sought  the  advice  of  John  F.  Tracy, 
president  of  the  Rock  Island  road,  and  of  H.  H.  Porter,  who  was  also  con¬ 
nected  with  it.  They  both  urged  him  to  go  slowly,  as  earnings  were  poor 
and  the  advancing  season  would,  in  the  natural  order  of  things,  bring  a 
tight  money  market.  But  Woodward  had  gone  too  far  to  retreat. 


242 


THE  NEW  YORK  STOCK  EXCHANGE 


N  June  16th  Commodore  Vanderbilt,  who  was  engaged  in  obtaining 
about  $5,000,000  for  Harlem  improvements  by  the  sale  of  40,000 
shares  of  Harlem  stock,  posted  a  notice  to  the  effect  that  on  the 
following  Thursday  10,000  shares  of  Harlem  would  be  offered  for  sale,  the 
proceeds  to  be  applied  to  the  completion  of  the  new  depot  at  Fourth 
Avenue  and  Forty-second  Street.  This  notice,  harmless  as  it  appeared  at 
the  time,  a  few  days  later  became  a  thorn  in  Woodward’s  flesh.  He  had 
run  Rock  Island  up  to  129%  on  Tuesday,  June  20th.  At  the  close  of  that 
day’s  business,  while  the  bears  were  offering  Rock  Island,  seller  thirty  days, 
at  four  per  cent,  below  the  market,  he  went  over  his  accounts  and  found 
that  he  had  bought  190,000  shares  of  stock.  Of  the  road’s 
Woodward  total  capitalization  of  about  170,000  shares,  30,000  shares 
of  his  deal.  were  too  far  out  of  the  Street  to 
be  factors  in  the  situation,  and 
50,000  shares  were  thought  to  be  tied  up  by 
the  pool.  Therefore,  about  90,000  shares  were 
presumably  purchasable  on ’Change  at  the  time 
he  began  his  independent  operations.  As  Mr. 

Woodward  held  contracts  for  190,000  shares, 
there  was  apparently  a  short  interest  of  100,- 
000  shares  or  more.  Such  a  short  interest 
should  be  sufficient  to  put  the  stock  to  300 
with  comparative  ease.  But  if  the  pool  shares 
had  really  been  tied  up,  as  Woodward  believed, 
it  was  strange  that  a  sharper  demand  had  not 
made  itself  felt,  no  matter  how  freely  he  had 
kept  his  stock  loaned  out.  At  all  events,  he  was 
in  a  position  to  squeeze  the  bears  most  profitably,  if  the  necessary  cash  to 
force  a  settlement  of  short  contracts  were  provided.  He  had  virtually  ex¬ 
hausted  his  own  resources  in  manipulation,  and  financial  assistance  was 
imperative.  On  the  evening  of  this  Tuesday  he  visited  Commodore  Vander¬ 
bilt,  described  the  situation  and  offered  to  divide  the  prospective  profits  in 
return  for  a  loan  of  $250,000  for  the  morrow.  Vanderbilt’s  answer  fur¬ 
nishes  a  remarkable  commentary  upon  the  changes  in  the  Street  since  1871. 
“Woodward,”  said  he,  “you  hold  the  prettiest  hand  I  ever  saw — I  play 
poker,  you  know — but,  in  the  first  place,  I  never  speculate  in  stocks;  and 
even  if  I  did  I  couldn’t  help  you.  I  haven’t  the  ready  money.  I’m  borrowing 
$4,000,000  or  $5,000,000  for  my  Harlem  improvements.  There  is  only  one 
man  in  New  York  wrho  has  any  ready  money  to  speak  of — Daniel  Drew. 
Better  try  him.”  Woodward  answered  that  Drew  was  the  biggest  fish 
in  the  net.  “Very  well,”  said  the  Commodore,  “if  he’s  caught,  he  certainly 
wants  to  get  out.  Make  a  deal  with  him  and  he’ll  bite.” 


WILLIAM  8EARLK  WOODWARD. 


THE  ENDING  OF  TWO  NOTABLE  CAREERS 


243 


“Uncle  Daniel”  Drew  lived  at  the  time  in  an  imposing  house  at  the 
southwest  corner  of  Broadway  and  Sixteenth  Street,  long  since  torn  down. 
Woodward  called  at  his  residence  on  this  same  Tuesday  evening,  and  the 
septuagenarian  financier  received  him  in  the  front  parlor  and 
listened  calmly  and  attentively  to  the  proposition  of  his  ^)pealed 

antagonist.  Perhaps  Drew  had  reason  to  believe  that  the  Commodore 
Rock  Island  short  interest,  irrespective  of  his  own  regrettable  y^n<i®rbllt  for 

A  .  °  help,  he  secures 

contracts,  was  not  nearly  so  extensive  as  Woodward  snp-  a  promise  of  aid 
posed,  and  if  that  were  the  case  it  would  certainly  pay  better  fro™ 
to  let  Woodward  ruin  himself  than  to  join  hands  with  him  in  Daniel  Drew‘ 
an  attempt  to  corner  other  men.  At  all  events,  he  received  his  visitor 
with  suave  manners  and  a  kindly  voice.  He  permitted  a  benignant  smile 
to  find  its  way  across  features  that  were,  as  a  rule,  unlikely  to  inspire  trust, 
and  graciously  accepted  the  proffered  terms.  He  was  to  be  relieved  of  loss 
on  his  own  short  contracts,  and  was  to  divide  the  profits  of  the  deal  in 
return  for  a  loan  of  $250,000,  which  his  brokerage  firm,  Kenyon,  Cox  &  Co., 
would  pay  before  10  o’clock  the  following  morning.  Pleasantly  the  old 
man  bowed  his  visitor  out.  As  the  house  door  closed  he  stepped  back  into 
a  rear  room,  where  a  prominent  broker,  who  still  bears  an  honored  name 
in  Wall  Street,  had  been  sitting  unobserved.  “What  d’ye  think  that  ’ere 
feller  wanted  me  to  do?”  he  remarked.  “Wanted  me  to  give  him  a  rope 
for  him  to  hang  me  with.” 1 

Shortly  before  10  o’clock  the  next  morning,  Woodward  sent  to  the 
office  of  Kenyon,  Cox  &  Co.,  for  the  loan  Drew  had  promised  him.  They 
knew  nothing  whatever  of  the  matter.  The  market  opened  and  he  put  in 
supporting  orders,  buying  the  stock  at  130%,  and  a  few  points  lower,  and 
vainly  waiting  for  his  rescue  as  Bonaparte  awaited  Grouchy. 

At  10:30  a.  m.,  with  no  word  from  Drew,  and  no  hope  of  reinforcements 
from  any  other  quarter,  he  realized  that  he  had  been  betrayed.  g  Ui  ut 
He  sent  word  to  his  brokers  to  protect  themselves,  and  uave  qm  ^  ’ 
announced  his  suspension  to  the  Stock  Exchange. 

Rock  Island  dropped  to  110  cash  at  the  first  Board,  28,000  shares 
being  sold  under  the  rule,  and  20,000  shares  in  free  trading.  The  stock 
closed  that  day  at  112%.  Woodward’s  principal  brokers  were  Dater  & 
Timpson,  Earl  &  Saltonstall,  Robert  Waller,  and  W.  E.  Tunis  &  Co.  All 
these  went  to  the  wall  that  day,  and  J.  W.  Gillespie,  James  Austen, 
H.  A.  Dennison,  A.  G.  Wood  and  H.  A.  Bowen  also  failed.  The  panic  was 
virtually  confined  to  Rock  Island,  the  general  list  being  well  supported. 
The  excitement  was  so  great,  however,  that  Mr.  Fanshawe,  of  Fanshawe, 

1  In  the  course  of  a  suit  over  some  Union  Pacific  controversy,  brought  by  S.  V.  White  against  Daniel 
Drew,  the  latter  testified,  on  March  5, 1878,  that  Mr.  White  was  engaged  with  him  in  those  Rock  Island 
operations  of  1871,  and  that  they  lost  therein  more  than  $100,000.  If  Drew  is  to  be  believed,  he  did  not 
gain  much  by  playing  false  with  Woodward. 


244 


THE  NEW  YORK  STOCK  EXCHANGE 


McDougall  &  Co.,  burst  a  blood  vessel  while  on  the  Exchange.  The  ruined 
brokers,  as  a  whole,  had  no  harsh  things  to  say  of  the  operator  who  had 
,  involved  them  in  misfortune.  His  own  liabilities  amounted 

The  comer  ends 

in  the  min  of  to  about  $3,500,000.  How  heavily  the  brokers  suffered  may 
its  promoter  be  instanced  by  the  case  of  Mr.  Gillespie,  who  said  that  he  had 
and  his  brokers.  jog.j.  |^qq  qqq  jn  an(}  piunged  himself  into  debt  to  the 

extent  of  $200,000  or  $300,000. 

On  Thursday,  Commodore  Yanderbilt,  serene  in  the  consciousness  of 
having  been  graduated  at  the  college  of  speculation,  went  on  with  his 
Harlem  programme  by  selling  the  10,000  advertised  shares.  One  broker 
took  them  all,  at  127  and  127 %,  in  two  lots.  Mr.  Woodward’s  great  career 
was  ended.  His  enemies  camped  on  his  trail  for  several  years,  endeavoring 
to  prevent  him  from  clearing  off  his  debts.  He  got  a  discharge  in  bank¬ 
ruptcy  on  November  24,  1876.  He  died  in  August,  1890,  from  injuries 
resulting  from  carrying  a  woman  out  of  a  burning  house  in  Brooklyn. 


aSjgjHE  Orangemen’s  parade  on  July  12,  1871,  is  still  remembered  in  this 
city  as  the  cause  of  frightful  riot  and  bloodshed,  and  deserves  some 
brief  reference  here  as  the  only  known  occasion  on  which  Colonel  Fisk 
ever  saw  active  service.  For  weeks  before  this  event  the  public  was  well 
informed  of  its  possibilities  in  the  way  of  disturbance  and  loss  of  life. 
Among  the  Catholic  Irishmen  in  New  York  there  was  a  large  number  of 
unfortunate  and  illiterate  persons  to  whom  the  Orange  parade  would  be  an 
insult  calling  for  immediate  battle.  The  Inspector  of  Police,  although  fully 
aware  that  the  Orangemen  had  as  good  a  right  to  march  in  this  free 
country  as  any  other  body  of  men,  was  still  possessed  of  sufficient  common 
sense  to  forbid  a  celebration  directly  calculated  to  stir  up  riot.  Governor 
Hoffman,  however,  was  suddenly  taken  with  a  desire  to  manifest  to  the 
world  the  flourishing  condition  of  religious  liberty  in  America,  and  he 
‘‘went  over  the  head  ”  of  the  Inspector  by  issuing  a  permit  for  the  parade. 

The  celebration  of  the  Battle  of  Boyne  took  place  on  the  12th,  by  favor 
of  the  Governor,  and  cost  some  sixty  lives — chiefly  the  lives  of  poor, 
ignorant  men  and  women  who  believed  that  they  were  doing  a  creditable 
thing  in  avenging  an  affront  to  their  religion.  Several  regiments  of  militia 
and  a  formidable  body  of  police  were  called  out  to  escort 
Colonel  Fisk  sees  aboutj  eighty  paraders.  When  the  column  reached  the  Grand 

active  service.  0  47  A 

Opera  House,  at  Eighth  Avenue  and  Twenty-third  Street,  the 
mob  of  onlookers  began  an  attack  with  stones.  Fisk,  who  was  in  the 
Opera  House  at  the  time,  hastened  out  and  joined  his  regiment,  the  Ninth, 
taking  the  command  from  Braine,  the  Lieutenant-Colonel.  Some  one  in 
the  Ninth  lost  his  head,  for  it  was  this  regiment  that  started  firing,  under 


THE  ENDING  OF  TWO  NOTABLE  CAREERS 


245 


small  provocation.  The  result  was  a  frightful  slaughter.  It  is  said  that 
Braine  had  given  the  order  to  fire,  when  Fisk  arrived  and  took  command. 
At  all  events,  the  mob  got  a  little  satisfaction  out  of  Fisk.  “The  crowd 
came  for  me/’  said  Fisk,  in  describing  the  circumstances  to  a  reporter  a 
day  or  so  later.  “I  was  set  upon  by  the  mob  with  stones  and  brickbats 
and  pitched  in  the  gutter.  When  I  got  up  my  coat  was  all  torn  off  and  I 
found  I  was  wounded.  I  limped  into  a  house,  which  was  broken  open  for  a 
hospital.  I  got  there  a  big  overcoat  and  hat,  blackened  my  moustache  and 
otherwise  disguised  myself,  and  hobbled  over  a  fence  into  the  street.”  After 
clearing  the  fence  the  Colonel  hastened  to  the  Hoffman  House,  but,  fearing 
that  it  would  be  burned  down  if  he  stayed  there,  slipped  quietly  away  again 
and  found  refuge  in  Long  Branch. 

Two  of  the  members  of  the  Ninth  Regiment  lost  their  lives  that  day. 
The  regiment’s  opinion  of  its  Colonel’s  conduct  may  be  gathered  from  the 
fact  that  when  his  name  was  mentioned  in  the  armory  it  was  greeted  with 
a  storm  of  hisses.  Fisk  had  previously  enjoyed  among  the  militiamen  such 
popularity  as  libiral  spending,  rough  good  humor,  and  a  conversation 
spiced  with  questionable  jests  not  infrequently  offered. 

The  financial  horizon  of  the  fall  of  1871  was  devoid  of  a  cloud,  even 
though  storms  lurked  beneath.  The  national  crops  were  large,  and  business 
seemed  thriving.  Manufactures,  said  the  statisticians,  had  increased  twenty- 
five  per  cent,  in  twelve  years.  Old  Government  bonds  were  being  successfully 
refunded  into  new  ones  on  terms  of  advantage  to  the  borrower.  In  August 
the  Street  heard  that  Jay  Cooke,  McCulloch  &  Co. — the  London  house  of 
Jay  Cooke,  who  was  the  floater  of  most  of  the  national  war  loans — had 
taken  over  the  balance  of  the  new  $200,000,000  refunding  loan,  amounting 
to  some  $130,000,000,  for  a  foreign  syndicate.  This  was  an  exaggeration. 
Mr.  Cooke  had  taken  only  $30,000,000  of  the  loan,  $10,000,000  for  distri¬ 
bution  among  the  national  banks,  as  in  war  times,  and  $20,000,000  which 
had  been  placed  abroad.  Of  the  remaining  $100,000,000,  Secretary 
of  the  Treasury  Boutwell  said,  half  would  be  reserved  for  the  banks  for 
sixty  days,  and  they  were  to  get  one-eighth  of  one  per  cent,  commission  on 
what  they  subscribed  for  and  the  right  to  be  designated  full  depositaries. 
The  bonds,  which  bore  five  per  cent,  interest,  were  well  taken,  and  paid  for 
in  gold.  Confidence  and  good  feeling  were  general.  In  a  speech  at  Cleveland 
on  September  29th  Mr.  Boutwell  said :  “  I  cannot  doubt  that  the  last  five 
years  constitute  the  most  prosperous  period  of  the  nation’s  life.”  The 
primal  cause  of  all  this  commercial  activity,  over  which  statesmen  grew 
eloquent,  was  currency  inflation.  Prosperity,  boasting  of  its  health,  had 
two  years  more  to  live. 

For  weeks  the  market  had  seen  the  bulls  triumphant,  the  advance  of 
prices  keeping  pace  with  the  garnering  of  crops.  Then  came  the  terrible 


246 


THE  NEW  YORK  STOCK  EXCHANGE 


Chicago  fire,  which  destroyed  property  estimated  at  $150,000,000,  or  more, 
in  value.  It  was  on  Saturday,  October  7th,  that  the  first  conflagration 
occurred.  This  was  checked  after  four  entire  blocks  had  been  consumed.1 
At  10  o’clock  on  Sunday  night  the  flames  again  burst  into  fury,  and  began 
ravaging  the  heart  of  the  Western  metropolis,  ere  long  wiping 
Chicago  fire,  out  not  only  bank  and  office  buildings,  factories  and  homes, 
but  railway  depots,  warehouses,  and  the  grain  elevators  at  the 


October  7,  8,  9, 
1871. 


edge  of  Lake  Michigan.  When  the  New  York  Stock  Exchange 
opened  its  doors  for  business  on  Monday,  October  9th,  the  fire  was  still 
raging.  The  market  was  weak  at  the  opening,  and  prices  fell  off  rapidly  as 
telegrams  poured  into  this  city  bearing  news  of  the  progress  of  the  flames. 
By  2  o’clock  the  floor  was  a  scene  of  intense  excitement.  Men  had  come  to 
realize  the  import  of  the  disaster.  The  insurance  companies,  they  knew, 
had  received  a  staggering  blow,  which  might  be  expected  to  start  a  chain 
of  failures,  while  the  great  railway  trunk  lines  which  entered  Chicago  had 
been  so  materially  crippled  that  the  prices  of  their  shares  must  certainly  be 
affected.  Furthermore,  the  simple  fact  that  thousands  were  being  ruined  by 
the  flames  in  the  Western  city  was  likely  to  spread  commercial  disaster  else¬ 
where.  The  downward  movement  of  prices  at  the  Board  increased  in 
velocity,  and  in  a  brief  space  of  time  the  hopefulness  of  the  first  hours  of 
trading  had  been  succeeded  by  consternation.  “  Pale,  eager,  excited  faces,” 
said  a  contemporaneous  writer,  “and  eyes  glittering  with  anxiety,  and 
nervous,  restless  movements  of  hand  and  frame,  and  many  a  wild  yell  in 
hard,  metallic,  unnatural  tones — these  by  themselves  betokened  the  advent 
of  a  serious  crisis.”  By  4:30  p.  m.  prices  had  fallen  from  four  to  ten 
per  cent.,  and  money  was  commanding  half  of  one  per  cent,  a  day.  The 
market  rallied  slightly  toward  the  close. 

On  the  day  following,  Tuesday,  the  Stock  Exchange  held  a  meeting, 
after  the  first  call,  to  consider  the  disaster.  W.  B.  Clerke,  who  had  succeeded 
William  Seymour,  Jr.,  that  year,  was  president  of  the  Board.  On  the 
motion  of  William  Alexander  Smith,  who  had  served  the  Board  three  years 
as  treasurer  and  once  as  president,  the  sum  of  $20,000  was 
Brokers  con-  appropriated  for  the  Chicago  sufferers.  The  Board  also 
the'fire  victims  decided,  on  the  motion  of  J.  L.  Brownell,  the  vice-president, 
that  the  amount  should  be  increased  to  $50,000  if  the  Govern¬ 
ing  Committee  found  that  the  finances  would  permit  it.  At  3  p.  m.  of  the 
same  day  the  Gold  Exchange  voted  to  tax  its  members  $10  each,  and 
its  treasury  $5,000,  for  the  Chicago  victims.  These  benefactions  were 

1  The  first  fire  originated  in  the  planing  mill  of  Lull  &  Holmes,  on  the  block  between  Canal,  Clinton, 
Van  Buren,and  Jackson  streets,  at  11  o’clock  on  Saturday  evening.  It  did  something  more  than  $250,000 
worth  of  damage.  The  second,  and  really  calamitous,  fire  started  in  a  frame  stable  in  the  rear  of  a 
DeKoven  Street  shanty.  A  woman  entered  the  stable  shortly  before  10  o’clock  on  Sunday  evening  to  milk 
a  cow.  She  carried  a  kerosene  lamp  with  her,  which  she  set  down  in  the  straw  beside  her  stool.  The  cow 
kicked  the  lamp  over  and  the  straw  was  ignited,  thus  giving  rise  to  the  conflagration.  Curiously  enough, 
the  wretched  little  house  from  which  the  woman  emerged  to  go  to  the  stable  was  untouched  by  the  fire. 


THE  ENDING  OF  TWO  NOTABLE  CAREERS 


247 


in  line  with  the  feeling  exhibited  by  the  entire  nation.  Such  a  sense  of 
brotherhood  prevailed  as  to  touch  even  the  masters  of  the  Erie  Railroad. 
The  road  gave  free  transportation  to  the  supplies  which  charitable  persons 
forwarded  to  Chicago. 

The  brokers’  generosity  did  not  ward  off  trouble  on  Tuesday,  for, 
although  the  fire  was  then  over,  a  semi-panic  occurred  in  the  morning. 
Prices  fell  lower  than  on  the  previous  day,  rallied  with  violence,  and  then 
lost  a  portion  of  the  recovery.  There  were  three  failures  on  Tuesday  and 
three  on  Wednesday.  A  good  idea  of  the  extent  of  the  depression  may  be 
obtained  from  the  following  table  of  fluctuations  on  October  7th,  9th, 


and  10th : 

Saturday. 
(Final  bids 

Monday. 

(Low 

Monday. 
(Final  bids 

Tuesday. 

(Low 

Tuesday. 
(Prices 
made  on 
the  recovery.) 

Stock. 

on  the  curb.) 

prices.) 

on  the  curb.) 

prices.) 

Western  Union,  . 

.  .  66% 

56% 

57 

54 

59 

Ohio  &  Mississippi,  . 

.  •  42% 

36% 

37 

34% 

38% 

Pacific  Mail, 

52 

47 

47% 

44% 

47% 

New  York  Central  cons.,  . 

.  •  92% 

86 

87% 

84 

89% 

New  York  Central  scrip,  . 

.  .  87% 

83% 

83% 

80 

83% 

Union  Pacific, 

.  •  27% 

22% 

23 

20% 

24 

Erie, . 

.  .  30% 

25% 

26% 

25 

28 

Wabash,  .... 

.  •  62% 

54% 

54% 

52% 

57% 

Reading,  .... 

.  .  114 

108% 

109% 

103 

108% 

Lake  Shore, .... 

.  106% 

95% 

96% 

91% 

97% 

North-Western,  . 

.  .  69% 

63 

63% 

60% 

63% 

North-Western  preferred,  . 

.  •  90% 

86 

86% 

83 

88% 

Rock  Island, 

.  109% 

98%* 

98% 

94 

101 

St.  Paul,  .... 

.  .  62% 

55% 

56% 

54 

57% 

St.  Paul  preferred, 

81 

77% 

77% 

73% 

77 

“  On  the  capital  of  these  concerns  alone,”  said  the  Times  on  Tuesday, 


referring  to  this  list  of  fifteen,  “there  is  a  loss  of  market  value  of  between 
$25,000,000  and  $26,000,000  in  a  single  day  (Monday).  We  submit  that 
this  is  quite  enough.”  The  public  seemed  to  acquiesce,  for  the  market 
rallied,  and  continued  for  several  months  to  improve.  Its 
recuperative  powers  were  well  attested  by  the  fashion  in  which 
it  bore  the  bank  failures  of  December.  The  Ocean  National 


Extent  of  the 
depression. 


Bank  went  to  the  wall  on  December  12th  by  reason  of  bad  loans,  after  the 
bank  examiner  had  reported  it  to  be  in  good  condition.  On  the  day  follow¬ 
ing  the  Union  Square  National  and  the  Eighth  National  banks  went  under. 
Stocks  were  dull,  but  fell  a  point  or  two  on  December  14th.  The  remarkable 
vitality  of  the  general  list  was  no  doubt  accounted  for  by  the  fact  that  the 
fire  panic  had  gone  beyond  reason. 


|N  December  22,  1871,  a  New  York  newspaper  printed  this  London 
dispatch : 

“The  Erie  Protective  Committee  publishes  the  following  communi¬ 
cation  as  received  from  its  agent  in  New  York:  ‘The  new  Attomey- 

1  Rock  Island  was  ex-dividend  4  per  cent,  on  Monday. 


248 


THE  NEW  YORK  STOCK  EXCHANGE 


General  (Barlow)  proposes,  in  his  official  capacity,  to  break  up  the  whole 
combination  of  the  Erie  ring,  without  respect  to  persons.’  The  publica¬ 
tion  of  this  intelligence  has  been  received  with  great  joy  by  the  parties 
interested.” 

Here  was  a  storm  signal  not  to  be  neglected.  Already  the  Tweed  gang 
of  thieves  were  in  grevious  trouble.  The  campaign  for  municipal  honesty 
which  the  Times  had  started  in  1870  was  meeting  with  success.  The  defeat 
of  Tammany  at  the  polls,  the  resignation  of  Tweed,  Sweeny,  and 
cigna™  St°rm  Connolly,  and  the  arrest  of  Tweed  and  Connolly,  ended  this 
triumvirate’s  career  of  municipal  crime  and  also  their  useful¬ 
ness  to  the  Erie  managers.  Between  Gould  and  Fisk,  moreover,  there  had 
arisen  some  ill  feeling,  the  actual  cause  of  which  is  in  doubt.  It  culmi¬ 
nated,  at  all  events,  in  Gould’s  demanding  that  Fisk  sacrifice  himself  to 
public  sentiment  by  resigning  from  the  Erie  directorate  and  thus  averting 
trouble  from  the  road.  Fisk  acceded  to  this  demand  in  December,  1871. 1 

At  4:30  p.  m.  of  Saturday,  January  6, 187 2,  Fisk  was  shot  in  the  arm  and 
abdomen  by  his  old  enemy,  Edward  S.  Stokes,  at  the  Grand  Central  Hotel, 
now  known  as  the  Broadway  Central,  Broadway  and  Bond 
stokes  aesassi-  streets.  His  death  took  place  in  the  hotel  early  the  following 
morning.  His  wife,  who  lived  in  Boston,  came  to  this  city, 
and  showed  much  evidence  of  grief  over  the  slaying  of  her  erring  spouse. 
Throughout  his  last  hours  Fisk  conducted  himself  with  fortitude  and 
courage. 

The  quarrel  with  Stokes  was  twofold.  The  men  were  rival  suitors  for  the 
favor  of  a  woman,  Helen  Josephine  Mansfield,  whom  Stokes  won  after  Fisk 
had  installed  her  in  a  handsome  house  within  a  stone’s  throw  of  his  offices. 
“Prince  Erie”  ran  after  many  women,  but  was  genuinely  infatuated  with 
this  one.  He  sobbed  at  her  feet  like  a  baby,  imploring  to  be  taken  back, 
after  one  of  their  misunderstandings.  He  lavished  gifts  upon  her  and  poured 
out  his  heart  to  her  in  letters  rich  in  expression  if  defective  in  grammar. 
The  letters,  Fisk  publicly  declared,  were  the  tools  by  which  the  woman  and 
his  rival  extorted  from  him  a  substantial  sum  of  blackmail  money.2  They 
answered  his  charge  by  subjecting  him  to  an  action  for  criminal  libel. 
Stokes  also  had  a  business  quarrel  with  Fisk.  They  had  been  partners  in 

1The  Life  and  Times  of  Col.  James  Fisk,  Jr.  R.  W.  McAlpine.  New  York.  1872. 

2  Stokes  explained  kis  grievance  after  a  fashion  in  a  letter  printed  on  April  29, 1872 :  “  In  regard  to  the 
idea  that  I  ever  desired  to  extort  money  from  Fisk,  I  will  say  that  I  have  been  in  legitimate  business  for 
the  past  ten  years.  With  the  exception  of  a  reverse  in  1865,  I  had  been  generally  successful  until  I  was 
induced  to  take  James  Fisk,  Jr.,  as  partner  in  my  oil  business  in  Brooklyn.  By  him  I  was  flagrantly  robbed 
and  outraged.  My  refinery  was  seized  at  midnight  on  Sunday  by  a  lawless  gang  of  ruffians,  without  any 
process  of  law,  while  I  was  thrown  into  prison  and  there  enjoined  from  even  attempting  to  proceed  to 
regain  my  property.  After  considerable  litigation  a  satisfactory  compromise  was  made,  but  an  Erie 
lawyer  adroitly  trapped  me  into  his  confidence  and  induced  me  to  move  a  satisfactory  settlement,  then 
made  and  on  the  verge  of  being  signed  and  closed.  After  inducing  me  to  abandon  this  settlement,  which 
would  have  dropped  all  litigation  between  Fisk  and  myself,  he  obtained  all  the  papers  which  they  so  much 
desired,  and  then  betrayed  my  confidence  by  making  an  award  in  the  interest  of  Fisk.  The  same  day  the 
lawyer  left  for  Europe.  This  breach  of  confidence  victimized  me  out  of  .f 50,000,  which  it  was  previously 
stipulated  I  should  receive.” 


THE  ENDING  OF  TWO  NOTABLE  CAREERS 


249 


an  oil  refinery  and  had  separated.  The  life  of  Stokes’  oil  company  depended 
on  his  possession  of  transportation  facilities  over  the  Erie.  He  learned  that 
Fisk  intended  to  shut  these  off  and  ruin  him.  When  he  found  out  that  the 
libel  action  and  a  suit  growing  out  of  the  oil  quarrel  were  both  going  Fisk’s 
way,  he  satisfied  his  feelings  by  committing  murder. 

The  crime  was  dastardly  and  deliberate.  Stokes  lay  in  wait  for  his 
victim,  and  gave  him  absolutely  no  chance.  Had  Stokes  been  an  illiterate 
laborer  he  would  have  dangled  in  a  noose  two  months  later.  As  it 
happened,  he  was  convicted  of  murder  once,  but  obtained  a 
new  trial,  and  finally  had  to  serve  a  brief  term  for  man-  “ntenced 
slaughter.  The  miscarriage  of  justice,  due  to  his  position  and  eiaughter. 
connections,  need  not  concern  us  nor  provoke  sympathy  with 
the  burst  of  nauseous  sentimentality  over  Fisk  which  the  murder  called 
into  being.  If  assassination  endows  a  man  with  virtue,  doubtless  Mr.  Fisk 
now  sits  in  the  company  of  the  saints.  Yet  a  candid  narrator  could 
scarcely  permit  the  single  trait  of  liberality  in  this  man’s  character  to 
offset  his  gigantic  thieveries,  his  betrayal  of  all  manner  of  trusts,  his 
debauchery  of  the  judiciary — in  short,  his  contempt  for  purely  ethical  con¬ 
siderations.  Certain  it  is  that  genuine  tears  were  dropped  on  Fisk’s  coffin 
lid,  and  that  many  of  the  poor  bewailed  his  death.  Wall  Street,  with  its 
ready  knack  of  reducing  such  matters  to  commercial  terms,  hailed  it  as  a 
bull  argument  on  Erie.  While  Fisk  lay  dying,  the  brokers  in  the  Fifth 
Avenue  Hotel  discussed  with  interest  the  better  prospect  for  the  stock. 

In  Fisk’s  justification  it  has  been  said  that  he  was  quite  “cleaned  out/’ 
in  the  Street  in  his  early  days,  and  vowed  to  repay  this  ill  treatment,  and 
that  his  later  career  was  simply  the  fulfilment  of  his  oath.  Following  a 
similar  process  of  reasoning,  many  a  man  has  turned  brigand  and  cut-throat 
to  repay  the  world’s  unkindness.  But  however  we  may  regard  the 
character  of  Fisk,  it  is  undeniable  that  he  meant  much  to  the  Erie  ring. 
He  wielded  a  power  in  his  way.  With  Tweed  in  the  law’s  clutches,  and  Fisk 
gone  to  his  last  account,  and  the  English  shareholders  and  American  public 
inflamed,  the  times  had  changed  for  Fisk’s  surviving  associate. 


XVIII 


THE  PASSING  OF  THE  ERIE  RING 


0  W  long  President  Gould  could  have  defended  his  Erie  fortress 
with  Fisk  at  his  side  is  rather  uncertain.  At  all  events,  the 
hostile  forces  he  had  so  constantly  defied  were  now  preparing 
an  assault  which  he  could  not  resist.  Since  his  regime  began, 
the  Erie  road  had  been  not  only  virtually  ruined  by  extra¬ 
ordinary  stock  issues  but  directly  handled  for  his  benefit. 
He  unloaded  one  small  railway  property  after  another  upon  the  Erie, 
purchasing  in  his  fiduciary  capacity  what  he  was  selling  in  his  individual 
capacity.  He  antagonized  those  English  investors  who  had  been  foolish 
enough  to  buy  Erie  shares  and  those  who  had  interested  themselves  in  the 
Atlantic  &  Great  Western  road,  which  ran  from  Salamanca  to  Dayton, 
was  leased  to  the  Erie  for  a  term  of  years  and  was  said  to  be  misused  for 
Erie’s  advantage. 

His  lawsuits  were  beyond  number.  In  fact,  it  may  be  said  that  to  be 
in  litigation  was  his  normal  condition,  and  the  decision  of  one  or  two 
important  cases  against  him,  in  view  of  the  evidence  brought  out,  made 
an  adverse  public  impression,  which  the  weakness  of  Erie  Stock  increased. 

Gould’s  power  was  maintained  by  a  law,  the  enactment  of  which  he  had 
secured,  dividing  the  Erie  directorate  into  classes  and  keeping  the  control 
of  the  road  in  his  hands  for  a  term  of  years,  irrespective  of  the  changes  in 
actual  ownership  of  the  shares,  a  device  not  uncommon  in  our 

fication  ofthe  own  ^me’  and  °ften  productive  of  good  results.  When  the 

Erie  directors.  feeling  of  the  stockholders  reached  a  point  that  determined 

them  to  oust  him  from  power,  they  had  to  contend  with  this 
measure.  An  ordinary  election  would  not  serve.  Means  must  be  used  to 
induce  some  of  the  Gould  directors  to  turn  against  him.  For  “means” 
read  “money.”  The  only  argument  likely  to  be  effective  with  an  Erie 
director  was  that  indicated  by  the  dollar  mark. 


THE  PASSING  OF  THE  ERIE  RING 


251 


Frederick  A.  Lane,  a  lawyer  who  had  been  reckoned  among  Mr.  Gould’s 
faithful  allies,  was  one  of  the  Erie  directors  disposed  to  yield  to  this  argu¬ 
ment.  By  his  cooperation,  the  enemy  found,  it  would  be  quite  easy  to  get 
inside  the  fortress.  Mr.  Lane  seems  not  only  to  have  given  his  own  services 
to  the  attacking  party,  but  to  have  influenced  the  minds  of 
certain  of  his  fellow  directors.1  The  representatives  in  this  treachery  m  the 
city  of  the  English  shareholders  and  of  all  who  were  dissatis¬ 
fied  with  the  Gould  management  constituted  the  attacking  party.  They 
were  headed  by  Major-General  John  A.  Dix,  whom  they  agreed  upon  as 
Gould’s  successor,  and  they  had  secured  the  services  of  General  Daniel  E. 
Sickles,  then  United  States  Minister  to  Spain,  who  was  in  this  country  on 
leave  of  absence  from  his  post.  The  English  house  of  Bischoffheim  & 
Goldschmidt  and  its  allies,  including  James  McHenry,  contributed  the  sum 
of  $750,000  to  secure  the  necessary  resignations  from  the  Erie  Board. 

On  Monday,  March  11, 1872,  occurred  the  coup  d'etat.  A  party  of  some 
twenty  men,  including  General  Dix,  General  George  B.  McClellan,  W.  Watts 
Sherman,  William  R.  Travers,  H.  G.  Stebbins,  former  president  of  the  Stock 
Exchange,  and  others,  met  at  the  residence  of  Samuel  L.  M.  Barlow,  No.  1 
Madison  Avenue.  At  about  11  a.  m.  they  proceeded  to  the  Grand  Opera 
House  and  entered  the  hallway  leading  to  the  Erie  directors’  room.  Jay 
Gould  was  downtown  at  the  time.  A  letter  demanding  that 
he  call  a  special  meeting  of  the  Board,  signed  by  Frederick  A.  The  enemy  &t- 

_  i/Q/CixO* 

Lane,  Justin  D.  White,  H.  N.  Otis,  Homer  Ramsdell,  Henry 
Thompson,  John  Hilton,  0.  H.  P.  Archer,  M.  R.  Simmons,  and  George  C.  Hall, 
all  directors,  and  couched  in  the  hypocritical  terms  of  pretended  distrust  of 
his  management,  had  been  addressed  to  Mr.  Gould.  Apparently  it  did 
not  reach  him.  Archer  took  hold  of  the  situation,  in  his  capacity  as  vice- 
president  of  the  road,  and  called  a  meeting  in  the  Board  room  at  noon. 

The  directors  who  signed  the  defiant  letter  and  the  attacking  party 
fraternized  at  this  meeting.  Thomas  G.  Shearman,  the  Erie  counsel,  was 
first  suspended  from  office.  Then  General  Dix  was  elected  to  the  vacancy 
which  was  created  by  Fisk’s  death.  One  by  one,  each  of  the  nine  men  who 
rallied  beneath  Lane’s  banner  resigned  his  place  and  a  new  director  was 
elected  to  fill  it.  Those  who  thus  entered  the  Board  were  General  McClellan, 
Gen.  H.  L.  Lansing,  Gen.  Alexander  S.  Diven  (who  had  served  some  time 


1  The  State  Select  Committee  appointed  to  investigate  Erie,  in  its  report  of  May  17, 1873,  said  that  the 
testimony  before  it  was  to  the  effect  that  Lane  had  offered  to  secure  a  majority  of  the  Board  for  the 
London  shareholders  for  $1,500,000,  but  that  General  Sickles  found  it  could  be  done  for  $750,000,  includ¬ 
ing  his  legal  fee  of  $160,000.  The  committee  gave  the  bribes  paid  as  follows:  To  Lane  and  Thompson, 
$67,500  each;  to  Simmons,  $50,000;  to  Archer,  $40,000;  to  Otis,  White,  and  Hilton,  $25,000  each.  This 
made  $300,000  in  bribes.  Contingent  expenses,  exclusive  of  the  Sickles  fee,  were  about  $290,000.  It  was 
an  enormous  bonanza  for  all  concerned.  The  committee  report  commented  as  follows : 

“Aside  from  the  motives  which  inspired  the  policy  and  the  actions  which  resulted  in  the  overthrow  of 
the  Gould  directors,  the  manner  and  the  means  cannot  but  be  regarded  with  the  severest  disapprobation. 
.  .  .  The  spectacle  of  a  United  States  Minister  to  a  foreign  court  leaving  his  duties  there  and  lending 
himself  to  the  execution  of  a  scheme  of  this  kind  is  not  calculated  to  heighten  our  respect  for,  or  to  inspire 
our  confidence  in,  the  integrity  of  the  public  service  under  our  Government.” 


252 


THE  NEW  YORK  STOCK  EXCHANGE 


Gould  reaches 
the  scene,  and 
violence  ensues. 


before  on  the  Board),  John  Jacob  Astor,  J.  F.  D.  Lanier,  W.  W.  Sherman, 
W.  R.  Travers,  H.  G.  Stebbins,  and  S.  L.  M.  Barlow.1  Mr.  Barlow  was  elected 
counsel  and  Joseph  Larocque  attorney.  Finally  Jay  Gould 

rin^ i^the* new '  was  removed  from  office  as  president  and  treasurer,  and 
mig  m  e  new.  Qeneraj  j^x  was  eiec^e(j  president  of  the  rejuvenated 

Erie  Railroad.  The  meeting  was  not  altogether  peaceful.  In  the  course 
of  these  radical  changes  a  party  of  roughs  in  the  Erie  employ  broke  into 
the  room,  armed  with  injunction  papers  signed  by  Judge  Ingraham. 
These  papers  had  been  granted  on  the  charge  that  the  resignation  had 
been  purchased  for  $750, 000.2  General  Dix’s  troops  met  the  invaders 
zealously,  and  the  papers  were  torn  up  before  they  could  be  served. 

Gould  had  now  reached  the  Grand  Opera  House,  and  he  and  Shearman 
entrenched  themselves  in  the  president’s  room  with  several  policemen.  The 
Dix  party  was  assisted  by  a  group  of  stalwarts  from  the  United  States 
Marshal’s  office,  and  decided  to  serve  Mr.  Gould  with  orders 
to  surrender  the  Erie  books.  They  knocked  at  the  door  of 
the  president’s  room  and  demanded  that  it  be  opened  on  the 
authority  of  the  United  States.  The  name  of  their  country 
proving  an  ineffective  weapon,  they  had  recourse  to  a  crowbar.  The  door 
was  wrenched  open,  and  in  poured  the  Dix  party  and  swept  away  their  foes. 
Mr.  McFarland,  Barlow’s  law  partner,  took  Mr.  Shearman  by  the  collar  of 
his  coat  and  threw  him  away  from  the  door  by  which  he  was  trying  to 
escape.  Crowley,  a  deputy  marshal,  then  started  in  pursuit  of  Mr.  Gould, 
armed  with  the  papers  which  were  to  be  served  upon  him.  Mr.  Gould 
began  to  run  around  the  room,  all  egress  being  barred,  and  threw  chairs 
behind  him  as  he  fled,  in  an  endeavor  to  head  off  the  representative  of  the 
law.  The  spectacle  was  exciting  and  not  unmixed  with  humor.  Crowley 
overcame  all  obstacles  with  despatch,  and  finally  reached  the  panting 
financier,  shoved  the  papers  into  the  breast  of  Mr.  Gould’s  coat,  and  signal¬ 
ized  his  triumph  by  shouting,  “You  are  served !  ” 

The  Dix  party  retired  with  the  honors  of  the  occasion,  and  the  next  two 
hours  were  made  eventful  only  by  desultory  combats  between  the  roughs 
employed  on  either  side.  As  the  day  wore  on,  a  force  of  119 
worthies,  with  over  developed  muscles,  was  posted  in  and 
about  the  directors’  room,  in  charge  of  generalissimo  Thomas 
Lynch.  This  strategic  position  they  held  throughout  the  night.  Upon  the 
furniture  in  this  and  neighboring  chambers,  which  bore  witness  to  the 
luxurious  taste  of  the  departed  Fisk,  they  eventually  stretched  their  limbs 
to  enjoy  a  merited  repose.  Mr.  Gould  was  baffled  temporarily,  but  not  yet 

1  The  new  Board  wa8  evidently  changed  later,  some  of  the  Lane  party  returning  to  office.  Poor’s  Man¬ 
ual  of  1872-73  excludes  the  names  of  Messrs.  Astor  and  Lanier  from  the  list  of  Erie  directors  selected  at  this 
time,  and  adds  the  names  of  0.  H.  P.  Archer,  George  C.  Hall,  F.  N.  Drake,  Charles  Day,  Homer  Ramsdell, 
John  Ganson,  Edwin  Eldridge,  and  Henry  Sherwood. 

2  This  money  was  alleged  to  have  been  obtained  by  Bischoffheim  &  Goldschmidt  out  of  the  Atlantic  & 
Great  Western  coffers. 


A  lull  after 
the  storm. 


THE  PASSING  OF  THE  ERIE  RING 


253 


conscious  of  defeat.  One  of  his  first  moves  had  been  the  securing  of  the 
telegraph  office  in  the  building,  and  he  was  soon  emitting  messages  to  all 
parts  of  the  Erie  road,  asserting  his  authority  and  warning  the  employes  to 
recognize  none  other.  Furthermore,  he  had  notices  to  the  same  effect 
posted  about  the  building,  but  these  were  speedily  torn  down.  His  enemies, 
aware  of  his  resourcefulness,  enjoined  their  hired  guards  not  to  allow  any 
one  to  smuggle  legal  papers  into  the  directors’  room.  An  incident  which 
occurred  in  the  course  of  the  night  was  described  in  a  contemporary 
newspaper  as  follows,  the  scene  being  the  interior  of  the  directors’  room : 


“Presently  there  came  a  gentle  tap  upon  the  plate-glass  door  of  the 
apartment.  The  bluecoated  guardian  opened  it  sufficiently  to  admit  of  the 
insertion  of  a  ruby  tinted  nose.  ‘You  can’t  come  in,’  growled  Cerberus. 
‘I  want  to  see  Mr.  Archer.  Don’t  push  the  door  against  me,’  whined  the 
owner  of  the  nose,  in  a  petulant  manner.  ‘  Yer  can’t  see  nobody  without 
yer  send  in  yer  name.’  ‘I’m  Mr.  David  Dudley  Field,  and  I  want  to  see 
Mr.  Archer.’  ‘Hold  on  to  that  door — don’t  admit  any  one — don’t  take 
any  paper,’  hurriedly  whispered  an  attendant  of  the  new  Board  to  the 
policeman.  Mr.  Field  again  sought  to  squeeze  his  way  in.  The  officer 
unceremoniously  thrust  him  back  and  shut  the  door  in  his  face.” 


All  the  chief  parties  to  the  contest  remained  in  the  building  while  the 
issue  was  in  doubt.  The  Erie  clerks,  many  of  whom  had  followed  the  Fisk 
fashion  in  the  matter  of  apparel,  and  were  constantly  resplendent  in  velvet 
coats  and  diamonds,  bought  presumably  with  their  savings,  hovered  about 
the  scenes  of  turmoil  in  pitiable  anxiety.  They  naturally  desired  to  be  on 
the  winning  side,  but  had  no  means  of  finding  it.  Mr.  Shearman  advised 
Mr.  Gould  that  his  position  was  legally  impregnable,  and  urged  him  to 
gather  his  forces  and  assault  the  directors’  room.  But  Mr.  Gould  knew 
better.  At  one  time,  however,  there  was  a  rumor  of  a  coming  attack,  and 
the  marshals  in  the  directors’  quarters  hastened  to  fasten  with  hoops  the 
sliding  door  leading  to  the  president’s  room.  The  Gould  forces  in  the  latter 
chamber  were  at  once  impressed  with  the  idea  that  the  foe  was  about  to 
take  the  aggressive,  and  displayed  equal  haste  in  fastening  the  same  door 
on  the  other  side  with  a  rope. 

Negotiations  between  the  opposing  parties  were  instituted  through 
General  Sickles,  and  at  length  Jay  Gould  was  convinced  that  his  Erie 
career  was  ended.  On  Tuesday  morning,  March  13th,  the  new 
Erie  directorate  met,  and  received  his  acknowledgment  of  admits  defeat, 
defeat.  Mr.  Gould  would  step  out,  but  to  save  his  face  he 
desired  permission  to  hand  in  his  resignation  to  his  own  Board — the  old 
Board — the  majority  of  whom  had  calmly  betrayed  him  for  good  andvalu- 


254 


THE  NEW  YORK  STOCK  EXCHANGE 


able  considerations.  The  victors  consented  and  the  old  Board  met  and 
accepted  Mr.  Gould’s  resignation.  Then  the  nine  men,  who  had  formerly 
given  up  their  places  to  the  newcomers,  repeated  the  process,  and  General 
Dix  was  a  second  time  elected  president.  Mr.  Gould  shook  the  dust  of  the 
Opera  House  behind  him,  and  the  news  was  spread  in  the  Street  that  ring 
rule  in  Erie  was  finally  at  an  end. 

This  was  a  day  of  much  excitement  on  the  Stock  Exchange,  and  com¬ 
ment  on  the  great  Erie  coup  filled  every  mouth.  There  wrere  few,  indeed, 
who  had  a  good  word  for  the  ousted  suzerain.  Erie  stock  began  to  advance 
with  the  vigor  of  renewed  youth.  The  quotation  which  had 
Excitement  closed  at  36%  on  Saturday  rose  on  Thursday  to  40,  and  on 
stockExchange  Monday,  one  week  after  the  revolution,  it  closed  at  48%  bid. 

A  furious  buying  movement  had  set  in  from  London,  and, 
according  to  report,  the  professional  operators  were  caught  short  of  the 
stock,  and  had  a  desperate  struggle  to  cover.  On  March  20th  Erie  sold  up 
to  52,  and  one  week  later  it  touched  67%,  a  striking  tribute  to  the  general 
opinion  of  the  Gould  regime.  On  this  day,  at  an  hour  when  the  market 
price  of  the  stock  was  63,  the  veteran  Drew,  who  knew  a  thing  or  two  about 
the  real  worth  of  Erie,  disposed  of  50,000  shares  of  it,  seller  one  year,  at  55, 
to  a  group  of  English  investors,  represented  by  Duncan,  Sherman  &  Co. 
He  vainly  offered  another  equal  amount  on  the  same  terms,  and  expressed 
his  belief  that  before  another  year  he  could  buy  in  the  stock  at  $30  a 
share.1 

In  May  two  of  Gould’s  faithful  allies,  whose  connection  with  the 
Tammany  ring  has  made  their  names  malodorous  in  this  city,  met  the 
disaster  they  had  long  been  courting.  The  Judiciary  Committee  of  the 
Assembly  recommended  the  impeachment  of  Judge  Barnard  and  Judge 
Cardozo.  Cardozo  was  shrewd  enough  to  resign  at  once,  and  Barnard  was 
eventually  turned  out  of  office.  The  Assembly  Committee’s  report  had  an 
indirect  influence  on  financial  affairs.  Mr.  Gould,  though  out  of  Erie,  had 
some  accounts  to  settle  with  the  road,  and  the  day  of  reckoning  was 
approaching.  The  ousting  of  Barnard  and  Cardozo  meant 
Punishment  of  that  when  that  day  came  he  would  be  deprived  of  one  valuable 
Cardozo.  source  of  defense — a  free  supply  of  judicial  orders  with  which 

to  tie  his  enemies’  hands.  Erie  stock  meanwhile  remained  an 
active  feature  in  the  market.  Drew  bulled  it  sharply  in  September,  with  the 
aid  of  Henry  N.  Smith,  and  burned  a  number  of  other  people’s  fingers  by  the 
movement,  although  he  explained,  at  the  time,  that  he  “wouldn’t  make  a 
corner  for  a  million  dollars.”  He  was  also  interested  in  a  brief  lockup  in 
this  month,  which  drove  money  up  to  one-sixteenth  per  cent,  a  day. 

1  The  stock  did  not  fall  to  30  in  this  period,  but  went  low  enough  to  enable  Drew  to  cover  at  a 
profit.  On  August  16th  it  sold  at  44%. 


THE  PASSING  OF  THE  ERIE  RING 


255 


Monday,  November  11, 1872,  witnessed  a  market  cataclysm,  due  to  the 
ruinous  Boston  fire,  which  started  in  a  large  mercantile  building  at  Sumner 
and  Kingston  streets,  Boston,  late  on  the  previous  Saturday  night,  and 
burned  till  3  p.  m.  Sunday,  ravaging  two  hundred  acres  of  the 
commercial  section  of  the  city.  It  dispossessed  about  930  Boston  fire 
firms.  The  loss,  according  to  the  newspaper  estimates,  and  10, 1872. 
amounted  to  about  $250, 000, 000. 1  But  the  market  recollected 
how  unreasonably  extreme  the  panic  at  the  time  of  the  Chicago  fire  had 
been  proved  by  the  subsequent  course  of  prices.  In  this  crisis,  there¬ 
fore,  although  the  depression  was  marked,  the  recovery  was  scarcely  less 
so,  as  the  following  table  will  show : 


Stocks. 

New  York  Central, 

Erie,  .... 
Lake  Shore,  . 

Wabash, 

North-Western,  . 
North-Western  preferred, 
Rock  Island,  . 

Union  Pacific, 

Pacific  Mail,  . 


Sat.,  Nov.  9. 

Mon.,  Nov.  11. 

Mon.,  Nov.  : 

Close. 

Low  Price. 

Close. 

.  95 

89 

93 

.  51 

48% 

48% 

.  91% 

83% 

88 

.  71% 

64 

67% 

.  83% 

77% 

82% 

•  87% 

83% 

85 

•  109% 

101 

107 

.  36% 

30% 

33% 

.  90% 

81 

84 

Ten  Stock  Exchange  failures  took  place  on  Monday,  and  two  on  the 
following  day. 


EANWHILE  preparation  was  making  for  one  of  the  most  cele¬ 
brated  corners  in  Wall  Street’s  annals,  that  in  Chicago  &  North- 
Western  common  stock,  of  which  Daniel  Drew  and  Gould’s  old 
partner,  Henry  Nelson  Smith,  were  caught  short,  to  Mr.  Gould’s  substan¬ 
tial  advantage.  On  October  23, 1872,  North-Western  common  closed  at 
74%  bid  and  the  preferred  at  87%  bid.  The  stock  of  the  road  consisted  of 
nearly  $15,000,000  in  common,  and  more  than  $21,000,000  in  preferred 
shares. 

It  was  at  about  this  time  that  Mr.  Drew’s  brokers  sold  ten  thousand 
shares  of  the  common  stock  to  Mr.  Gould  at  78.  On  October  26th  the 
common  rose  to  83%  and  the  preferred  to  90.  Drew  and 
Smith  appeared  to  have  joined  hands  and  to  have  increased  The  Chicago 
their  short  interest,  for  the  common  stock  was  forced  down  to  western  corner. 
78%  four  days  later,  the  bears  bringing  into  play  a  fallacious 
rumor  that  the  Chicago  &  North-Western  direction  had  decided  to  issue 
convertible  bonds  to  the  amount  of  $10,000,000.  The  effect  of  this  canard 
was  short  lived  and  North-Western  common  again  began  to  advance. 

1  It  was  afterward  learned  that  the  actual  loss  was  about  $80,000,000. 


256 


THE  NEW  YORK  STOCK  EXCHANGE 


On  Wednesday,  November  20th,  the  situation  was  fully  revealed.  Jay 
Gould  had  quietly  been  absorbing  the  stock  that  his  old  partner  and  his 
former  mentor  had  been  flinging  upon  the  market,  and  had  contrived,  with 
his  marvellous  cleverness  at  drawing  aid  from  unexpected  sources,  to 
secure  two  allies  from  the  Vanderbilt  party,  Horace  F.  Clark  and  Augustus 
Schell.  He  represented  to  them  that  the  Chicago  &  North-Western 
property  was  being  ruthlessly  attacked  and  that  it  was  incumbent  upon 
them  to  help  him  in  his  effort  at  resistance.  The  fact  that  Schell  and  Clark 
were  standing  with  Gould  speedily  became  known  and  led  to  the  rumor 
that  Commodore  Vanderbilt  stood  with  him  also.  Gould 
Mr.  Gould’s  undoubtedly  had  all  the  help  he  needed,  as  his  enemies  found 
ames0rbllt  when  they  attempted  to  cover  their  short  contracts.  North- 
Western  common,  which  had  closed  on  November  19th  at  83%, 
opened  one-eighth  lower  on  the  day  following,  but  rose  with  a  swiftness  that 
carried  a  warning.  It  reached  95,  the  highest  quotation  since  the  winter  of 
1868-69,  when  it  had  ranked  as  a  ten  per  cent,  stock.  The  closing  quota¬ 
tion  was  a  bid  of  94%,  and  the  next  day,  Thursday,  saw  the  stock  carried  to 
par  by  the  frantic  purchases  of  the  shorts.  It  closed  at  98%,  twelve  points 
above  the  preferred. 

It  had  for  some  time  been  apparent  to  Drew  and  Smith  that  they  were 
fairly  cornered,  and  that  strategy  transcending  the  ordinary  limits  of  spec¬ 
ulative  battle  must  be  employed  to  save  them  from  heavy  loss.  Gould  was 
personally  directing  his  campaign.  Any  scheme  which  would  suddenly 
carry  him  from  the  field  of  action  at  a  critical  moment  might  involve  a  rout 
of  his  forces.  Kidnapping  being  impracticable,  the  sole  alternative  was  that 
of  a  legal  raid.  The  plotters  were  fortified  by  the  knowledge  of  excellent 
reason  for  bringing  about  Mr.  Gould’s  arrest.  He  had  been  guilty  of  mal¬ 
feasance  in  office  while  president  of  the  Erie,  and  Smith,  his  old  partner, 
knew  when  and  how.  Here  was  the  opportunity  to  entrap  him. 

General  Dix,  who  had  been  elected  Governor  of  the  State,  was  no  longer 
president  of  the  Erie  Railroad.  His  successor  was  Peter  H.  Watson,  who 
was  absorbed  with  a  laudable  desire  to  bring  a  good,  paying  property  out 
of  the  wreck  which  the  old  management  had  left  behind.  Mr.  Watson  was 
approached  by  Mr.  Smith  and  was  easily  persuaded  to  institute  suit  against 
Mr.  Gould  to  recover  the  huge  amount  of  which  the  Erie  had  been  defrauded 
by  its  late  president.  The  claim  was  placed  at  $9,726,551  and  interest. 
Astonishing  as  the  figure  is,  it  appeared  to  be  justified  by  subsequent 
events. 

Nothing  was  known  to  Gould  of  this  action  till  Friday,  November  22d. 
That  day  North-Western  common  opened  at  97  and  sold  down  two  points. 
It  had  risen  to  the  neighborhood  of  par  at  2:50  p.  m.,  when  Mr.  Gould  was 
suddenly  arrested  in  the  office  of  his  brokers,  No.  34  Broad  Street,  at  the 


THE  PASSING  OF  THE  ERIE  RING 


257 


order  of  Judge  Fancher,  of  the  Supreme  Court.  The  arrest  was  made  in 
pursuance  of  the  Watson  suit,  and  the  bail  had  been  placed  at  $1,000,000. 
Furthermore,  the  papers  showed  that  the  plaintiff’s  attorneys  had  origi¬ 
nally  inserted  the  figure  $9,000,000  to  represent  the  desired 
bail — an  amount  which  could  not  possibly  be  secured  that  Gould  under 
day — and  that  the  Judge  had  overruled  them  and  divided  the  critical  moment, 
sum  by  nine.  Even  the  smaller  amount  seemed  likely  to  be 
prohibitive.  The  circumstances,  and  the  hour  at  which  the  descent  upon 
Mr.  Gould  was  made — just  when  he  was  preparing  to  run  up  the  stock — 
indicate  that  the  arrest  was  part  of  a  stock-jobbing  scheme  of  Smith  and 
Drew,  although  there  is  no  reason  to  believe  that  Watson  had  any  other 
motive  than  the  performance  of  his  duty.  Smith  averred  that  he  put 
Watson  in  possession  of  the  needed  evidence  weeks  before  the  arrest  was 
made. 

Whether  or  not  he  managed  to  see  that  the  event  was  properly  timed 
the  reader  may  judge.  Certainly  if  Gould  had  been  unable  to  obtain 
bail  his  corner  might  have  gone  to  pieces.  But  the  ruse  of  his  foes  was 
ineffectual.  Clark  and  Schell  went  with  him  to  the  Sheriff’s  office  and  quali¬ 
fied  as  his  bondsmen.  In  half-an-hour  Gould  was  back  in  the  Street,  and 
meanwhile  the  brokers,  acting  under  his  orders,  had  begun  to  push  up  the 
stock.  The  result  was  a  scene  of  wild  excitement,  which  inten-  _  _  .  , . 

7  He  obtains  his 

sified  as  the  moments  wore  on.  The  price  of  North-Western  release  and 
common  rushed  upward  a  point  between  successive  sales. 

The  dealers  in  this  stock  stood  near  the  Wall  Street  door  of 
the  Board  room  — a  little  knot  of  half  delirious  men.  About  them  crowded 
virtually  the  whole  body  of  brokers  in  the  chamber.  Almost  all  other  deal¬ 
ings  seemed  for  the  time  to  be  suspended.  The  ordinarily  distended  scene 
of  busy  confusion  resolved  itself  into  one  group  of  struggling  bodies  and 
gesticulating  hands,  whose  owners  shouted  their  bids  in  the  centre  of  a 
mass  of  excited  onlookers. 

With  inexorable  force  the  stock  continued  to  rise.  It  touched  125, 
sprang  to  130,  leaped  twenty  points  higher,  and  fell  again  to  140.  Then 
the  buyers  carried  it  twenty-five  points  up  with  a  rush.  It  dropped  to  160 
and  again  rose  to  165.  And  now  came  a  spectacle  of  cruel  import  to  the 
stray  operators  who  had  been  caught  short  of  stock.  The  brokers  began 
to  bid,  with  not  an  offer  heard.  “I’ll  give  sixty-six,  sixty-seven,  seventy, 
seventy-five,  for  a  hundred!”  “Eighty  for  any  part  of  a  thousand!” 
“Eighty-five  for  a  hundred  North-Western!”  Up,  up,  up,  mounted  the 
frantic  bids,  with  the  swelling  of  tumult  and  despair,  till  the  figure  reached 
200.  At  this  price  a  little  stock  changed  hands.  The  hour  for  closing, 
4  p.  m.,  had  come.  The  brokers  poured  out  of  the  room,  and  the  Street 
knew  that  Gould  had  won  again. 


takes  care  of 
his  enemies. 


258 


THE  NEW  YORK  STOCK  EXCHANGE 


REW  was  widely  reported  to  be  short  of  North-Western  common  to  the 
extent  of  some  15,000  or  20,000  shares.  He  settled  a  large  propor¬ 
tion  of  his  contracts  this  day  by  the  delivery  of  stock  borrowed 
from  Henry  Keep’s  widow,  who  held  it  as  an  investment  and  was  easily 
persuaded  to  accommodate  her  venerable  friend  as  a  reward  for  his  advice  on 
financial  matters.  The  good  lady  seems  to  have  quite  overlooked  the 
opportunity  of  selling  her  stock.  Perhaps  she  shared  the  view  which  Mr. 
Clark  expressed  to  a  newspaper  reporter  who  sought  him  out  and  requested 
an  explanation  of  the  remarkable  price  gyrations.  “  The  only  reason  I  can 
see,”  said  Mr.  Clark,  after  denying  that  a  corner  existed,  “is  that  people 
have  arrived  at  a  just  appreciation  of  the  stock.” 

On  Saturday  the  stock  opened  at  155,  after  being  freely  offered  by  the 
Gould  brokers  at  150,  in  pursuance  of  a  policy  to  settle  at  that  figure. 
Most  of  the  day  it  fluctuated  between  155  and  140,  odd  lots  selling  all  the 
way  down  to  par,  while  the  smaller  operators  streamed  into  the  office  of 
Gould’s  brokers  to  settle  at  150  or  whatever  lower  figure  was  necessary  to 
save  them  from  bankruptcy.  But  at  2:45  p.  m. — “Uncle  Daniel”  having  failed 
to  cover  his  remaining  shorts,  and  being  unable  to  borrow  the 
needed  stock — his  creditors  began  buying  it  in  “under  the 
rule”  for  the  account  of  his  brokers,  the  move  originating  with 
S.  W.  Boocock.  The  first  hundred  shares  cost  155,  and  the 
bids  advanced  without  a  sale  from  that  figure  to  199%,  2,000 
shares  being  sold  at  the  latter  price.  All  told,  64,000  shares 
were  bought  “under  the  rule,”  largely  for  Drew’s  account,  the  last  lot  of  400 
shares  changing  hands  at  230,  the  highest  quotation  forced  by  the  corner. 

W.  R.  Travers  was  among  the  operators  caught  in  the  melee,  though  his 
commitments  amounted  to  only  900  shares.  Mr.  Gould,  in  a  lively  interview, 
declared  that  Mr.  Travers  had  “stepped  up  to  the  Captain’s  office  and 
settled,”  which  Mr.  Travers  promptly  denied  over  his  signature.  Of  his 
former  partner,  Smith,  Mr.  Gould  had  this  to  say :  “  Mr.  Smith  was  largely 
short  of  Pacific  Mail  a  short  time  ago,  and  was  caught  in  that  fix  by 
Mr.  Stockwell,1  who  intended  to  run  the  stock  up  on  him  in  return  for  some 
lawsuit  that  Smith  then  had  against  the  Pacific  Mail  Company.  I  was  in 
a  position,  however,  to  get  Mr.  Stockwell  to  let  him  out  easy,  and  thus 
saved  him  from  ruin.  His  gratitude  has  been  fully  shown  in 
Losses  in  the  the  events  that  have  transpired  during  the  past  few  days.” 
corner We8t€m  Smith’s  loss  in  the  North-Western  corner  is  impossible  to  esti¬ 
mate.  Gould  placed  the  total  loss  of  the  shorts  at  $20,000,- 
000,  doubtless  a  gross  exaggeration.  Drew  is  believed  to  have  dropped 
about  $1,500,000  in  this  struggle.  On  the  Wednesday  following  the 
corner  the  stock  fell  to  90,  and  the  battle  was  over. 

1  The  reference  is  to  A.  B.  Stockwell,  president  of  the  Pacific  Mail  Steamship  Company. 


Drew  is  forced 
to  cover  his 
short  contracts 
and  the  stock 
reaches  $ 230 
a  share. 


THE  PASSING  OF  THE  ERIE  RING 


259 


One  interesting  side  light  on  the  matter  was  thrown  by  a  letter  which 
Commodore  Vanderbilt,  enraged  at  the  coupling  of  his  name  with  the 
corner,  addressed  to  the  newspapers.  After  denying  that  he  had  the 
slightest  connection  with  the  matter,  he  proceeded  to  say: 

“I  have  had  but  one  business  transaction  with  Mr.  Gould  in  A  word  from 
my  life.  I  sold  him  a  lot  of  stock,  for  which  he  paid  me,  and 
the  privilege  of  a  call  for  a  further  lot,  which  he  also  settled. 

Since  then  I  have  had  nothing  to  do  with  him  in  any  way  whatever,  nor  do 
I  mean  ever  to  have  unless  it  be  to  defend  myself.  I  have,  besides,  always 
advised  all  my  friends  to  have  nothing  to  do  with  him  in  any  business 
transaction.  I  came  to  this  conclusion  after  taking  particular  notice  of 
his  countenance.” 


Commodore 

Vanderbilt. 


HE  charges  brought  against  Gould  in  the  Watson  suit  were  based  on 
an  affidavit  by  Smith,  and  referred  to  events  occurring  while  Gould 
was  president  of  the  Erie  Railroad.  Between  August  3, 1868,  and 
November  8, 1869,  it  was  alleged,  the  Erie  issued  407,347  new  shares,  which 
were  sold  through  Gould’s  firm  for  about  $12,803,000,  Gould  converting 
$4,499,131  to  his  own  use.  He  was  also  charged  with  saddling  his  own 
losses  in  speculation  upon  the  Erie  road,  and  with  various  other  acts  which 
swelled  the  Erie  claim  against  him  to  more  than  $9,700,000.  At  the  first 
publication  of  these  charges  Mr.  Gould  had  not  only  denounced  his  arrest  as 
a  stock-jobbing  trick,  but  had  also  published  a  release  of  debt  executed 
early  in  January,  1872,  in  favor  of  Fisk,  Lane,  and  himself,  by  a  committee 
representing  the  Erie  Railroad  Company.  But  apparently  he 
came  to  the  belief  that  this  release  would  not  hold  water,  and  The  Wateon 
that  he  was  too  fairly  caught  to  escape  by  a  fight.  Only  on 
this  theory  can  subsequent  events  be  explained.  For  it  was 
because  of  the  Watson  suit  that  he  made  his  famous  restitution,  and 
Jay  Gould  was  not  accustomed  to  give  valuable  possessions  for  nothing. 

He  quietly  turned  over  to  the  Erie  Railroad  property  valued  at 
$650,000,  which  reduced  the  claim  against  him  to  something  in  excess  of 
$9,000,000.  After  realizing  the  inevitable  he  agreed  to  a  compromise, 
based  on  the  conveyance  to  the  company  of  property  which  he  claimed  to 
be  worth  $9,000,000.  The  Erie  road  was  represented  in  the  negotiations 
by  a  committee,  consisting  of  Mr.  Watson,  Governor  Morgan,  William  R. 
Travers,  William  B.  Duncan,  and  Samuel  L.  M.  Barlow.  In  pursuance  of 
the  plan,  on  December  17th  Gould  wrote  to  Mr.  Watson  making  the  formal 
tender.  The  property  concerned  included  a  large  amount  of  real  estate  in 
New  York,  New  Jersey,  Pennsylvania,  and  Ohio,  and  a  miscellaneous  col¬ 
lection  of  stocks  and  bonds,  valued  at  between  $6,000,000  and  $7,000,000. 


suit  against 
Jay  Gould. 


260 


THE  NEW  YORK  STOCK  EXCHANGE 


“I  assume  that  there  is  no  longer  any  sufficient  reason  why  an  adjustment 
of  all  open  questions,  satisfactory  and  honorable  to  both  parties,  should 
not  now  be  made,”  wrote  Mr.  Gould ;  and  further  on :  “I  do 
a  concession  this  for  the  gake  Qf  peace,  because  any  litigation  of  such 
peace.  questions  is  more  annoying  to  me  than  the  loss  of  the  money 

involved,  and  because  I  am  sincerely  anxious  for  the  success 
of  the  Erie  Company,  in  which  I  have  a  large  pecuniary  interest.” 

According  to  Mr.  Barlow,  the  property  thus  turned  over  by  Gould 
would  be  worth  about  $7,000,000  at  immediate  sale,  but  was  worth  fully 
$9,000,000  to  the  Erie  Company.  The  delivery  of  the  deeds  and  certificates 
was  made  at  the  Barlow  office  at  11  a.  m.  on  Friday,  December  20th.  Four 
hours  were  consumed  in  counting  them,  and  at  the  end  of  that  period 
Mr.  Watson  carried  them  triumphantly  away  in  a  coupe.  Erie’s  long 
account  with  Jay  Gould  had  come  to  an  end. 

The  stock  of  the  Erie  Company,  which  opened  at  53%  on  December  19th, 
closed  on  the  day  following  at  60%.  Throughout  the  ten  or  twelve  days 
occupied  in  the  negotiations  it  had  been  extremely  dull,  hovering  around 
53.  Mr.  Gould  is  understood  to  have  cleared  several  millions  by  buying 
calls  on  Erie  stock  in  London  prior  to  his  restitution.  Doubtless  he 
recouped  himself  to  a  certain  extent  in  this  fashion,  but  his  net  loss  on  the 
whole  transaction  must  have  been  substantial.  It  afforded  some  comfort  to 
the  lovers  of  justice  and  some  balm  to  the  wounds  of  Henry  Nelson  Smith. 


XIX 

THE  PANIC  OF  1873 

“  Building  railroads  from  nowhere  to  nowhere  at  public  expense  is  not  a  legitimate 

undertaking.  ’  ’ —  Cornelius  Vanderbil  t. 

HERE  is  a  striking  variation  in  the  popular  views  as  to  the 
causes  of  commercial  panics.  The  events  which  bring  them 
on  axe  usually  plain,  after  the  fact  if  not  before  it.  But  the 
real  origin  of  all  these  phenomena  is  a  widely  disputed  point. 
The  student  of  those  most  conspicuous  in  this  country’s 
history  will  perceive,  however,  that  they  at  least  sprang 
from  a  common  root,  and  will  gather  the  impression  that  from  the  same 
root  springs  almost  every  genuine  business  panic — in  other  words,  every 
general  breakdown  which  crashes  upon  the  very  heels  of  boastful  prosperity. 
This  root  is  rank  speculation,  producing  the  rank  weed 
disaster.  Broadly  speaking,  the  panic  of  1837  was  a  land  The  origin  of 

panic,  that  of  1857  a  banking  panic,  that  of  1873  a  rail-  u^ted  states, 

road  panic,  and  that  of  1893  a  currency  and  industrial 
panic.  The  average  man  probes  no  deeper  than  the  superficial  characteris¬ 
tics.  But  the  fundamental  cause  of  all  these  misfortunes  was  the  excessive 
passion  for  speculation,  wThich  inflated  credit  to  the  bursting  point.  And 
as  speculation  will  always  exist  where  surplus  wealth  exists,  recurring 
panics  will  always  hold  a  place  in  the  normal  order  of  things  this  side  of 
the  social  millennium. 

In  the  fall  of  1873  there  occurred  a  frightful  depression,  coming  with 
the  greatest  suddenness  that  ever  marked  such  an  event  in  America.  It 
ended  a  period  of  buoyant  and  artificial  prosperity,  which  began  with  the 
issuing  of  legal  tenders  and  the  filling  of  shoddy  Government  contracts  in 
the  days  of  the  Civil  War.  We  have  already  traced  the  effects  of  the  grossly 
inflated  currency,  the  uncertain  conditions  of  life  and  the  existence  of  ill- 


262 


THE  NEW  YORK  STOCK  EXCHANGE 


gotten  riches,  which  in  turn  resulted  from  the  emergencies  of  the  nation’s 
trial.  While  the  war  was  consuming  billions  of  dollars’  worth  of  wealth,  the 
people  did  not  feel  the  waste,  because  they  were  not  being  directly  taxed  for 
it.  They  did  feel  the  presence  of  a  great  deal  more  money  in  circulation, 
and  forgetting  that  this  money  was  a  figment,  a  quantity  of  promises  to 
pay,  a  subterfuge  of  taxation,  they  thought  themselves  prosperous.  They 
spent  freely  and  gambled  freely.  Individuals  borrowed  heavily  to  invest  in 
Fictitious  ros  everything  that  promised  quick  fortunes,  and  controllers  of 
perityengen-°8  capital  not  only  were  eager  to  lend  but  actively  engaged  in 
dered  by  the  helping  on  new  enterprises.  Had  the  nation  soberly  adapted 
legal  tenders.  itself  to  a  gradual  return  toward  specie  payments,  realizing 
that  it  had  a  heavy  tax  to  meet,  and  proceeding  with  caution  in  its  business 
ventures— had  human  nature  in  short  been  suddenly  reformed — the  panic 
would  have  been  avoided.  As  it  was,  a  growing  extension  of  credits,  the 
corrollary  of  speculative  fury,  characterized  a  decade  in  which  crops  were 
good  and  labor  troubles  scarce.  Then  the  rain  descended,  and  the  floods 
came,  and  the  house  was  found  to  have  been  built  upon  sand. 

The  real  crisis,  the  testing  hour,  arrived  when  the  greatest  banking 
house  of  America  failed  in  its  attempt  to  finance  an  unproductive  railroad. 
This  failure,  which  precipitated  the  crash,  was  typical  of  the  whole  depres¬ 
sion.  For  the  speculation  of  the  era  had  taken  the  form  of  railroad  building. 
If  steam  locomotion  had  not  been  discovered  it  would  have  taken  some 
other  form.  But  men  were  infatuated  with  projects  for  building  steel  high¬ 
ways,  and  they  were  aided  and  abetted  by  the  Government.  It  is  a  question 
still  debated,  whether  the  Government  ought  ever  to  afford  an  artificial 
stimulus  to  any  sort  of  industry.  In  the  railroad  era  beginning  with  1862 
the  wisdom  of  the  Government’s  interference  was  certainly  not  proved 
beyond  doubt. 

A  brief  survey  of  the  field  will  be  necessary  before  the  recounting  of 
specific  events.  The  post-bellum  era  of  railway  building  began  in  1865, 
when  there  was  an  addition  of  1,177  miles  to  the  length  of  road  in  opera¬ 
tion,  the  total  being  35,085  miles.  Each  succeeding  year  saw  a  still  larger 
addition,  until  by  the  end  of  1868  there  were  42,255  miles  in  operation. 

Mr.  Poor  finds  that  in  the  five  years,  1869  to  1873,  inclusive, 
Extravagant  28,396  miles  of  new  road  were  built,  at  an  estimated  cost  of 

railway  building.  7 

$1,381,850,000,  and  that  almost  all  of  this  new  mileage  was 
in  operation  by  the  end  of  the  period.  As  about  $375,000,000  had  been 
spent  in  improvements  and  equipment  in  the  same  time,  the  country  had 
been  putting  about  $350,000,000  of  fresh  capital  into  railroads  every  year 
for  five  consecutive  years.1  In  1873  the  population  of  the  country  was  a 
little  in  excess  of  41,000,000  souls  and  the  railroads  comprised  more  than 

1  Manual  op  the  Railroads  of  the  United  States.  1874-75.  Henry  V.  Poor. 


THE  PANIC  OF  1873 


263 


70,000  miles,  having  cost  $3,784,543,034  in  bonds  and  stock.  The  roads 
in  1873  earned  nearly  five  per  cent,  on  this  capitalization,  but  the  solid 
earnings  were  made  chiefly  in  New  England  and  in  the  Middle  States.  In 
the  Southern  States  the  railways  paid  only  four-tenths  of  one  per  cent,  in 
dividends,  in  the  Western  States  two  and  one-quarter  per  cent.,  and  in 
Washington  Territory  and  the  Pacific  States  —  California,  Oregon,  and 
Nevada — the  total  dividends  were  two  per  cent,  of  the  capitalization. 

Had  the  American  people  been  left  to  build  their  new  pathways  for 
commerce  with  private  capital,  their  temper  at  this  time  would  still  have 
made  the  movement  excessive.  But  Congress  gave  it  the  further  impetus 
of  artificial  aid.  The  proper  development  of  great  instruments  of  progress 
is  in  response  to  actual  demand  for  their  immediate  use,  not  in  anticipa¬ 
tion  of  a  condition  which  may  make  them  useful  after  a  long  period  of 
slight  availability.  Sound  policy  would  have  permitted  the  population 
to  make  its  own  way  over  the  great  plains  beyond  the  Mississippi  until 
it  became  necessary  to  supply  these  regions  with  the  facilities  of  modem 
transportation. 

Certainly  no  sensible  business  man  provides  a  supply  in  advance  of 
demand,  except  in  sporadic  and  inconsequential  cases.  But  the  statesmen 
and  speculators  of  the  period  under  discussion  had  their  own  views  and 
were  determined  to  vindicate  them.  On  the  principle  that  great  means  of 
profit  induce  men  to  take  great  risks,  Congress  offered  alluring  terms  to  the 
transcontinental  railway  stock  subscribers  —  subsidies  in  bonds  to  supply 
their  immediate  needs  and  huge  grants  of  land  to  make  them  fortunes. 
Reference  has  already  been  made  to  the  great  Union  Pacific 
and  Central  Pacific  lines,  the  outgrowth,  like  many  another  Government  aid 
economic  blunder,  of  the  alleged  exigencies  of  war.  The  promote™^7 
Northern  Pacific  Railroad  was  likewise  rocked  in  the  Govern¬ 
ment  cradle  and  fed  upon  Government  pap.  This  company  was  chartered 
in  July,  1864,  with  authority  to  construct  a  road  from  Lake  Superior, 
through  Minnesota,  Dakota,  Montana,  Idaho,  and  Washington,  to  Puget 
Sound,  with  a  branch  to  Portland,  Oregon,  by  the  Yalley  of  the  Columbia 
River;  2,000  miles  in  all.  Its  authorized  capital  was  $100,000,000.  In 
1870  the  road  was  begun.  By  August  31,  1873,  the  company  had  455 
miles  in  operation,  it  had  issued  stock  to  the  amount  of  $18,239,300  and 
bonds  to  the  amount  of  $24,841,045,  had  a  floating  debt  of  nearly  $7,000, - 
000,  and  had  spent  about  $28,000,000  on  the  road.  Its  land  grants 
amounted  to  47,360,000  acres,  of  which  374,886  acres — less  than  one  per 
cent. — had  been  certified  to  the  company,  and  contracts  for  the  resale  of 
about  41,000  acres  at  from  $2.50  to  $8  an  acre  had  been  executed.  The 
financial  agents  of  the  road  were  Jay  Cooke  &  Co.,  the  bankers  who  had 
financed  the  Government  war  loans. 


264 


THE  NEW  YORK  STOCK  EXCHANGE 


fosfegrN  the  first  eight  months  of  1873  there  were  no  signs  which  indicated 
to  the  country  the  approach  of  trouble,  although  certain  events 
which  can  be  so  interpreted  by  the  historian  occurred.  February 
saw  another  flurry  in  North-Western.  The  same  month  witnessed  the  pas¬ 
sage  by  Congress  of  the  act  demonetizing  silver— the  measure  frequently 
described  as  “the  crime  of  1873.” 

March  wras  remarkable  for  a  squeeze  in  money,  coincident  with  a  rise  in 
gold.  On  April  1st,  the  day  the  Harlem  road  was  leased  to  the  New  York 
Central  for  401  years  for  eight  per  cent,  on  the  stock,  money  on  call 
reached  two  per  cent,  a  day.  Two  weeks  later  gold  touched  119%  (the 
highest  price  since  August  8,  187 0,  when  gold  was  tending  downward,  after 
having  been  forced  to  123%  by  the  Franco-Prussian  War),  and  it  never 
again  sold  for  so  high  a  figure.  On  the  16th,  Barton  &  Allen,  a  prominent 
Exchange  firm,  went  under  in  the  course  of  a  stock  flurry  that  was  almost  a 
panic.  On  the  29th,  Jay  Gould  was  assaulted  in  Delmonico’s  by  Joseph  J. 
Marrin,  attorney  for  some  of  the  Black  Friday  victims,  in  punishment  for 
breaking  a  promise  to  compromise  certain  litigation.  It  cost  Gould  some 
inconvenience  and  Marrin  a  fine  of  $200.  The  Street  was  still  cogitating 
upon  this  sensation  when  news  of  the  Vienna  Bourse  panic,  on  May  9th, 
arrived.  The  Austrians  had  for  years  been  speculating  in  wildcat  securities. 

Their  panic  resulted  in  a  shrinkage  of  $100,000,000  in  values 
IiayT  1873  °f  ^enua>  $10,000,000  in  American  securities  at  Berlin, 
and  serious  disturbances  at  Frankfort,  Amsterdam,  London, 
and  Paris ;  but  the  New  York  market  was  little  affected,  the  only  very  weak 
issue  being  Pacific  Mail,  which  had  been  falling  pretty  steadily  since  selling 
at  about  77  in  February,  and  which  sold  at  44%  in  May.  On  June  7th  it 
sold  at  38%.  Although  our  exports  had  increased  and  our  imports  had 
decreased  since  1872,  the  latter  were  still  far  larger  than  the  former.  We 
owed  Europe  a  heavy  debt,  and  were  sending  her  considerable  gold.  In  the 
spring  of  1873  it  became  known  that  merchants  were  finding  much  diffi¬ 
culty  in  disposing  of  their  importations.  Silks,  velveteens,  and  millinery 
goods  were  little  in  demand.  Foreign  merchandise  to  the  estimated  value 
of  $300,000,000  was  held  in  bonded  warehouses  in  this  city,  and  imports 
began  to  be  reshipped  to  foreign  markets.  Still  no  one  in  America  seemed 
to  have  an  atom  of  fear.  Boasts  of  prosperity  filled  the  universal  mouth. 

June  was  an  excessively  dull  month  in  the  stock  market,  and  July  was 
little  better,  but  the  prices  were  strong.  On  August  lltli  they  were  at  about 
the  highest  level  of  the  year.  They  were  off  a  trifle  in  the  latter  part  of  the 
month,  and  were  slightly  more  depressed  in  the  first  wTeek  in  September, 
but  optimism  was  as  strong  as  ever. 

When  the  tree  to  which  the  axe  has  been  applied  begins  to  tremble  and 
creak  the  prudent  man  takes  care  that  he  be  not  in  the  path  of  its  fall.  On 


THE  PANIC  OF  1873 


265 


September  8th,  the  New  York  Security  and  Warehouse  Company,  with  a 
capital  of  $1,000,000  and  a  nominal  surplus  of  $600,000,  suspended  pay¬ 
ment.  The  company  had  been  lending  its  funds  and  its  paper  to  Southern 
and  Southwestern  railroads,  which  had  been  unable  to  pro- 
tect  it.  Coincidentally  it  was  learned  that  two  directors  in  security  and 
this  company — Francis  Skiddy  and  Sheppard  Gandy,  both  Warehouse  fail- 
heavy  operators  in  sugar — had  been  seriously  embarrassed  by  others'^ 

the  price  of  gold,  which  had  fallen  to  about  112.  Stocks 
suffered  a  depression  of  a  few  points.  On  Saturday,  September  13th,  another 
failure  was  produced  by  the  railroad  mania,  and  prices  fell  one  to  four  and 
a  half  per  cent.  Kenyon,  Cox  &  Co.,  a  Stock  Exchange  house  in  which 
Drew  was  a  partner,  had  become  badly  involved  with  the  paper  of  the 
Canada  Southern  Railway,  in  the  directorate  of  which  this  venerable 
stock  jobber  was  included.  The  road  had  a  capital  stock  of  $8,000,000 
and  a  funded  debt  of  $9,000,000.  It  was  324  miles  long,  but  had  made  no 
public  reports  of  its  operations  —  doubtless  because  they  were  not  worth 
reporting.  The  impression  was  general  that  Drew  had  left  his  firm  to  shift 
for  itself  in  the  hour  of  need  and  had  in  this  way  greatly  moderated  his 
own  loss.  Kenyon,  Cox  &  Co.,  who  were  financial  agents  of  the  Canada 
Southern,  had  lent  the  road  large  sums.  They  had  endeavored  to  get  some 
English  capitalists  to  take  the  load  off  their  hands.  The  negotiations 
failed  and  they  suspended  payment. 

On  Wednesday,  September  17th,  the  tree  was  creaking  badly.  Money 
climbed  to  one-sixteenth  per  cent,  a  day,  influenced  by  the  first  effects  of 
the  fall  crop  demand  and  by  a  curious  disposition  toward  hoarding  on  the 
part  of  well-to-do  men.  Stocks  tumbled  alarmingly,  and  the  Herald  com¬ 
mented  on  the  event  as  follows :  “  Never  before  have  offered  such  oppor¬ 
tunities  for  investment.  It  is  difficult  to  conceive  any  other  cause  .  .  . 
than  an  unwillingness  to  trust  money  to  a  tide  that  of  late  has  been 
troubled  by  many  hidden  dangers.” 


N  September  17,  1873,  Jay  Cooke,  negotiator  of  war  loans,  and 
sponsor  of  the  national  bank  system,  was  the  most  noted  financier 
in  America.  He  had  for  more  than  three  years  been  actively 
engaged  in  a  project  which  he  believed  would  add  to  his  fame — 
the  carrying  through  of  the  Northern  Pacific  Railroad — “an 
enterprise,”  to  use  his  own  recent  words,  “which  has  never  yet 
been  excelled  in  the  merits  of  its  appeal  to  the  public.1  The 
line  ran  through  the  valleys  of  the  Red,  Yellowstone,  and  Columbia  rivers, 
and  Mr.  Cooke  called  it  the  “Valley  Route  to  the  Pacific.”  In  the  summer 

1North  American  Review,  November,  1902.  A  decade  of  American  finance.  Jay  Cooke. 


Jay  Cooke  and 
the  Northern 
Pacific. 


266 


THE  NEW  YORK  STOCK  EXCHANGE 


of  1870hehad  instituted  negotiations  forplacingtherailroad’sbonds,  which 
bore  seven  and  three-tenths  per  cent,  interest,  with  a  European  syndicate. 
The  plan  was  ruined  by  the  outbreak  of  the  Franco-Prussian  War.  In  the 
fall  of  1872  the  arbitration  of  the  “Alabama”  claims  resulted  in  a  decision 
favoring  this  country.  Great  Britain  was  angered,  the  feeling  on  both  sides 
was  bitter,  and  a  result  was  the  breaking  off  of  other  negotiations  which 
Mr.  Cooke  had  started  with  a  syndicate  of  English  capitalists.  He  attempted 
in  the  spring  and  summer  of  1873  to  place  the  bonds  on  the  American 
market,  already  loaded  with  an  immense  mass  of  questionable  railroad 
securities.  Mr.  Cooke’s  character  was  above  reproach,  and  his  name  carried 
great  weight  with  the  better  class  of  citizens  throughout  the 
Small  iuvestors  country.  Clergymen,  school  teachers,  farmers,  hundreds  of 
bo' d8  persons  of  moderate  means, 

and  with  the  knack  of  sav¬ 
ing,  invested  in  Northern  Pacific  on  his 
recommendation.  But  the  aggregate  of 
such  investments  was  not  sufficiently 
heavy.  Despite  the  power  with  which  he 
smote  the  rock,  the  stream  of  fresh  capi¬ 
tal  was  too  thin  to  meet  the  needs  of  the 
enterprise.  The  Credit  Mobilier  scandals 
and  the  lavish  issues  of  railroad  securi¬ 
ties  which  had  preceded  Mr.  Cooke’s  ap¬ 
peal  nullified  its  force.  His  firm  began 
to  draw  upon  their  own  resources  to  tide 
over  the  difficulty.  The  failures  in  the 
first  half  of  September  accentuated  the 
crisis  by  precipitating  a  run  on  the  New 
York  banks.  Mr.  Cooke’s  burden  became 
too  heavy  to  bear. 

When  the  New  York  Stock  Exchange 
opened  on  the  morning  of  Thursday,  September  18th,  the  Board  felt  that 
danger  charged  the  air.  The  scene  was  one  of  great  confusion,  and  the 
chairman  found  it  hard  to  get  a  hearing  by  the  blows  of  his  gavel.  When  a 
semblance  of  order  was  restored  he  announced  the  suspension 
of  Jay  Cooke  &  Co.  “A  monstrous  yell  went  up,”  said  a 
contemporaneous  writer,  “and  seemed  to  literally  shake  the 
building  in  which  all  these  brokers  were  confined.  .  .  .  Many 
tore  their  hair  and  ran  about  as  if  crazy,  pushing,  battling, 
shouting,  shrieking  to  others  equally  crazy.”  To  hundreds  it  seemed  as  if 
the  very  heavens  were  falling.  If  Jay  Cooke  had  failed,  who  could  be 
reckoned  solvent?  The  descent  of  prices  at  the  first  call  overwhelmed  an 


JAY  COOKE. 


Suspension  of 
Jay  Cooke  &  Co. 
announced  on 
’Change  Sep¬ 
tember  18,  1873. 


THE  PANIC  OF  1873 


267 


army  of  speculators.  Western  Union  tumbled  to  78,  Central  to  99%,  Lake 
Shore  to  86,  Union  Pacific  to  21.  It  was  a  day  of  widespread  disaster.  The 
Cooke  houses  in  Philadelphia  and  Washington  went  down  with  Jay  Cooke 
&  Co.,  but  the  London  house,  JayCooke,  McCulloch  &  Co.,  a  separate  concern, 
escaped  insolvency.  In  this  city  the  New  York  &  Oswego  Midland  Railroad, 
running  between  Oswego  and  Middletown,  New  York,  defaulted  on  its  bonds 
and  went  into  the  hands  of  Abram  S.  Hewitt,  as  receiver.  George  Opdyke 
was  president  of  the  road.  His  firm  also  failed.  Richard  Schell,  and  Robin¬ 
son  &  Suydam  announced  their  suspensions.  E.  W.  Clark  failed  in  Philadel¬ 
phia,  and  the  First  National  Bank  of  Washington,  which  was  organized  and 
chiefly  owned  by  the  Cooke  houses,  also  suspended  payment. 

Around  the  offices  of  Jay  Cooke  &  Co.,  at  the  northwest  corner  of  Wall 
and  Nassau  streets,  a  gathering  of  anxious  depositors  waited  for  some  word 
of  hope.  Over  the  desk  of  the  manager  within  those  offices  hung  a  mutely 
sardonic  sign  bearing  this  advertisement:  “ Buy  Northern  Pacific  7-30 
Bonds — asgood  as  Governments —  secured  by  mortgages  and  land  grants.” 

Mr.  Cooke  was  in  Philadelphia  at  the  time,  and  expressed  a  hopeful  view 
of  the  situation.  “I  believe,”  said  he,  “that  this  house  will  speedily  be 
relieved  from  embarrassment,  and  to  this  end,  if  need  be,  every  dollar  of 
means  possessed  by  members  of  the  firm  will  be  applied.  No  one  who  has  a 
dollar  on  deposit  here  will  lose  it.”  The  New  York  house  issued  this  state¬ 
ment : 

“  The  immediate  cause  of  the  suspension  of  JayCooke  &  Co.  wasthelarge 
drainings  upon  them  by  their  Philadelphia  house  and  their  own  depositors 
during  the  last  fortnight.  Both  houses  have  suffered  a  large  drain  upon 
their  deposits  in  consequence  of  the  uneasy  feeling  which  has  recently  pre¬ 
vailed  and  which  has  affected,  more  or  less,  all  houses  closely  identified  with 
new  railroad  enterprises.  The  Philadelphia  house  had  previously  been 
weakened  by  large  cash  advances  to  the  Northern  Pacific  Railroad,  of  which 
they  are  financial  agents.  The  business  of  Jay  Cooke,  McCulloch  &  Co., 
London,  is  entirely  distinct,  and  that  house  is  perfectly  solvent,  so  that  it 
will  meet  its  outstanding  drafts  and  letters  of  credit  without  inconvenience 
to  travellers,  and  have  a  large  cash  surplus  to  apply  to  the  American  house. 
The  firm  of  Jay  Cooke  &  Co.  and  its  members  have  large  amounts  of  real 
and  personal  property  upon  which,  however,  they  cannot  immediately 
realize.  They  are  confident  depositors  will  be  paid  in  full.” 

To  the  mind  of  the  average  man  the  unhappy  turn  of  affairs  'was  a 
mystery,  despite  this  explanation.  The  public  was  blinded  by  fictitious 
prosperity.  “  The  country  itself  was  probably  never  more  really  prosperous 
than  it  is  at  present,”  said  Horace  B.  Claflin.  The  Herald,  commenting 
editorially  on  the  situation,  said  on  September  19th :  “  The  country  is  too 
prosperous  and  wealthy  to  be  seriously  disturbed  by  the  collapse  of  a  few 
speculators  or  ephemeral  banking  institutions.”  Old  Commodore  Yander- 


268 


THE  NEW  YORK  STOCK  EXCHANGE 


bilt’s  keen  eyes  penetrated  to  the  seat  of  trouble  in  an  instant.  He  declared 
that  men  were  trying  to  do  about  four  times  as  much  business  as  they 
should.  “Of  course,”  said  the  sage  of  Central,  “they  soon  get  short,  and 
have  to  bolster  up  their  business  as  best  they  can  by  robbing  Peter  to  pay 
Paul.  If  people  will  carry  on  their  business  in  this  manner  they  must  run 
amuck.  Building  railroads  from  nowhere  to  nowhere  at  public  expense  is 
not  a  legitimate  undertaking.” 

Friday,  the  19th,  was  a  day  of  gloom.  A  dark  sky,  a  pelting  rain, 
and  thick,  black  mud,  through  which  despondent  thousands  plodded  to  the 
environs  of  disaster,  all  comported  with  the  despair  which  filled  so  many 
minds.  Long  before  the  hour  for  the  reopening  of  the  speculative  arena 
throngs  of  the  curious,  the  eager,  the  fearful,  and  the  ruined,  as  if  foreseeing 
that  this  day  would  produce  more  failures  than  any  other  in  the  city’s 
history,  were  mingling  upon  the  thoroughfares  of  the  financial  district. 
Both  sides  of  Wall  Street,  from  Broadway  to  Hanover  Street,  were  thickly 
lined,  and  the  crowd  on  Nassau  and  Broad  streets  extended  from  the  Post 
Office  to  Exchange  Place.  Upon  the  steps  of  the  Sub-Treasury  stood  a 
battalion  of  spectators  in  the  driving  rain.  Below  them  the  crowds  were 
thickest,  and  the  brokers  and  clerks  scurrying  about  among  the  strangers 
made  the  busiest  scene.  But  it  was  a  lively  day  for  the  restaurants  and 
saloons  of  the  vicinity. 

At  10  o’clock  the  turmoil  of  the  brokers  began  anew,  and  half  an  hour 
later  the  important  house  of  Fisk  &  Hatch,  which  had  been  sustaining 
Chesapeake  &  Ohio,  announced  its  suspension,  due  to  an  unexpected  calling 
of  loans  to  the  amount  of  $1,500,000  by  the  firm’s  creditors. 
Fisk  &  Hatch  js  impossible,”  said  the  head  of  the  firm,  “to  obtain  money 

on  any  kind  of  collaterals,  and  we  could  not  afford  to  sacrifice 
our  securities.”  This  house  was  distinguished  for  having 
negotiated  the  sale  of  $40,000,000  of  Central  Pacific  bonds,  and  its  failure 
produced  a  remarkable  sensation.  Prices  descended  with  accelerating 
speed.  The  Fourth  National  Bank,  where  Fisk  &  Hatch  were  heavy  depos¬ 
itors,  had  to  submit  to  a  run,  and  paid  out  $300,000  in  course  of  the  day. 
Values  recovered  somewhat,  but  the  fluctuations  were  constantly  violent,  a 
typical  case  being  Western  Union,  which  opened  at  75,  sold  at 
77,  68%,  75%,  68,  and  closed  at  73.  At  one  time  this  stock 
sold  at  73%  regular  and  70  for  cash,  making  the  value  of 
money  three  and  one-half  per  cent,  of  7 0,  or  five  per  cent,  a  day.  The  gen¬ 
eral  stringency  was  frightful,  and  a  meeting  of  twelve  bank  officers  was 
held  at  the  Clearing  House  to  consider  the  situation. 

The  failures  this  day  included  C.  D.  B.  Randolph  (whose  partner  was  a 
son-in-law  of  the  famous  Thomas  A.  Scott,  of  the  Pennsylvania  Railroad), 
Greenleaf,  Norris  &  Co.,  A.  M.  Kidder  &  Co.,  Beers  &  Woodward,  and  twenty 


suspend 

payment. 


Money  at  five 
per  cent,  a  day 


THE  PANIC  OF  1873 


269 


others.  Among  the  brokers  themselves  the  panic  revealed  notable 
instances  of  sangfroid,  as  when  Mr.  Beers  was  found  playing  checkers  in 
his  office  by  a  reporter  seeking  news  of  his  troubles.  By  the  following  day 
the  list  of  suspensions  included  the  Bank  of  the  Commonwealth,  the  Union 
and  National  Trust  companies,  and  thirty-three  other  brokerage  or 
banking  concerns  in  New  York,  twelve  in  Philadelphia,  and  various  others 
in  Albany,  Chicago,  Washington,  Toronto,  St.  Louis,  and  smaller  places. 
Marvin  Brothers  were  among  the  victims.  The  Bank  of  the  Commonwealth 
suspension  resulted  from  overcertifying  the  checks  of  its  former  president, 
Edward  Haight,  to  the  amount  of  $225,000,  of  which  Mr.  Haight  could 
only  make  good  $60,000.  The  National  Trust  Company,  capitalized  at 
$1,000,000,  was  broken  by  a  severe  run. 

The  failure  of  the  Union  Trust  Company  involved  two  scandals.  The 
company  was  financial  agent  for  the  Lake  Shore  Railroad,  and  had  paid 
out  $1,750,000  in  bond  interest  for  the  railroad.  Its  suspension  was  due  to 
inability  to  recover  this  sum,  and  also  to  the  defalcation  of  its  secretary, 
C.  T.  Carleton,  who  had  disappeared  with  upward  of  $350,000.  Further¬ 
more,  the  company  had  turned  over  $2,250,000  in  Lake  Shore  bonds,  acting 
on  the  orders  of  the  railroad  company’s  treasurer,  to  the  gcandals  in  the 
brokerage  house  of  George  B.  Grinnell  &  Co.,  which  had  hypoth-  Union  Trust 
ecated  them  and  permitted  the  use  of  the  money  in  the  private  failure- 
speculations  of  Richard  Schell  and  of  Horace  F.  Clark,  the  Commodore’s  son- 
in-law.  Clark  was  dead.  Schell  and  the  brokers  had  become  bankrupt  in 
the  panic,  and  the  money  had  been  dropped  in  the  market.  Commodore 
Vanderbilt  came  down  on  Saturday  with  a  large  amount  of  securities  to  help 
out  the  Union  Trust  Company,  but  was  too  late  to  prevent  the  suspension. 
Eventually  he  made  good  the  Lake  Shore  debt  of  $1,750,000,  by  giving  his 
notes  for  the  amount,  with  Harlem  stock  as  collateral.  Meanwhile  the 
Union  Trust  failure,  and  three  minor  suspensions,  quickened  Ne^  York  gtock 
the  downward  movement  of  prices.  It  is  impossible  to  say  Exchange  closed 
what  limit  would  have  been  reached  save  for  the  drastic  action  Saturday,  SeP- 
of  H.  G.  Chapman,1  president  of  the  Stock  Exchange,  and  the  tember  20, 18 '3' 
Governing  Committee,  who  decided  to  put  an  end  to  the  market  for  the  time 
being,  and  at  noon  Mr.  Wheelock,  one  of  the  vice-presidents,  entered  the 
room  and  suspended  the  Stock  Exchange  sine  die.  This  was  in  pursuance 
of  a  resolution  passed  at  a  special  session  of  the  committee. 


1  Mr.  Chapman  had  been  elected  in  May  to  succeed  Edward  King,  who  succeeded  W.  B.  Clerke,  The 
closing  of  the  Exchange,  according  to  the  account  of  Mr.  Clews,  in  his  “  Twenty -eight  Years  in  Wall  Street,” 
saved  Jay  Gould  from  bankruptcy.  He  is  said  to  have  been  heavily  short  of  stocks  and  to  have  purchased 
half-way  down  the  decline  to  cover  his  contracts,  and  then  to  have  discovered,  upon  trying  to  return  the 
borrowed  securities,  that  the  persons  (among  them  leading  Vanderbilt  brokers)  who  had  loaned  them  to 
him  could  not  take  up  and  payfor  them.  Mr.  Clews  informs  us  that  the  notice  of  the  suspension  of  Gould’s 
broker,  Charles  J.  Osborn,  was  sent  to  the  Exchange,  but  reached  it  just  after  the  order  to  close  arrived, 
and  was  therefore  not  made  public. 


270 


THE  NEW  YORK  STOCK  EXCHANGE 


President  Grant  and  the  Secretary  of  the  Treasury,  William  A.  Richard¬ 
son,  had  come  to  the  city  and  were  at  the  Fifth  Avenue  Hotel.  At  10  a.  m. 
on  Sunday  they  met  a  delegation  of  bankers,  merchants,  and  other 
influential  men,  among  them  ex-Governor  Morgan,  and  were  besieged  with 
demands  for  instant  relief.  Roughly  speaking,  the  currency  then  outstand¬ 
ing  consisted  of  $750,000,000,  of  wdiich  $356,000,000  were  legal  tenders, 
$350,000,000  national  bank  notes,  and  the  balance  fractional  currency. 
The  Government  also  held  in  reserve  the  right  to  issue  an  additional 
p  i  t  g  c  t  $^4,000,000  in  tenders.  The  President  had  started  on 
refuses  to  issue  Saturday  to  buy  bonds,  but  only  $2,500,000  in  bonds  had 
fresh  legal  been  offered  on  the  Government’s  terms,  and  the  visitors 
deemed  this  plan  inadequate.  They  urged  the  issue  to  the 
banks,  on  approved  collateral,  of  $30,000,000  of  new  legal  tenders. 
Commodore  Vanderbilt  came  in  the  afternoon  and  offered  to  contribute 
securities  to  the  amount  of  $10,000,000  toward  relieving  the  situation  if 
the  Government  would  supply  $30,000,000.  The  President,  however,  not 
only  disliked  inflation,  but  doubted  the  legality  of  the  proposal,  and  with¬ 
stood  the  appeal.  It  wTas  doubtless  one  of  the  wisest  decisions  of  his 
administration,  made  in  resistance  to  the  strongest  pressure. 

On  Monday  the  Associated  Banks  met  and  agreed  to  put  out  Clearing 
House  certificates,  receivable  in  settlement  of  their  balances,  to  be  issued  to 
any  Clearing  House  bank,  on  approved  collateral  at  seventy-five  per  cent., 
.  and  on  public  funds  or  gold  certificates  at  par,  the  bank 

Banks  pool  their  ,  .  .  . ,  , 

reserves  and  obtaining  them  to  pay  seven  per  cent,  interest.  All  told, 
suspend  currency  certificates  to  the  amount  of  $26,565,000  were  issued,  the  last 
paj  ments.  one  being  retired  in  November.  Coincidentally  with  this  decision 

the  banks  pooled  their  legal  tenders,  the  pool  lasting  till  November  1st.  In 
this  period  of  forty  days  they  suspended  currency  payments,  except  in  a 
few  cases  of  small  drafts,  and  paid  only  by  certified  check. 

These  measures  were  productive  of  better  feeling,  but  the  fact  that  the 
Union  Trust  Company  went  into  the  hands  of  a  receiver,  instead  of  open¬ 
ing  its  doors  as  it  had  expected  to,  did  not  tend  to  restore  confidence. 

Crow7ds  of  depositors  hung  about  its  office  awaiting  news  or 
Curb  brokers  selling  their  claims  to  speculators  at  seventy-five  cents  on 
the  dollar.  The  Stock  Exchange  remained  closed  and  the 
Gold  Exchange  was  only  nominally  open.  A  run  on  the 
savings  banks  in  this  city,  and  two  bank  suspensions  in  Pittsburg,  added 
to  the  gloom  of  the  situation.  On  Tuesday  the  curbstone  brokers  started 
an  independent  stock  exchange  at  No.  48  Broad  Street,  although  they  did 
but  little  business.  The  general  feeling  was  better,  and  some  trading  began 
in  the  Gold  Room.  But  at  2:30  p.  m.,  Henry  Clews  &  Co.,  whose  London 
correspondents  were  the  Government’s  financial  agents  in  the  British  capital, 


start  a  new 
exchange. 


THE  PANIC  OF  1873 


271 


announced  their  suspension,  due  in  general  to  the  inability  to  realize  on 
their  assets,1  and  in  particular  to  a  refusal  of  the  Fourth  National  Bank  to 
certify  their  checks.  They  had  been  the  subjects  of  a  heavy 
run.  The  day  following,  another  important  firm,  Howes  &  Henry  Clews  & 
Macy,  after  having  paid  out  currency  at  the  rate  of  $100,000  fa<j,1wea 

a  day,  also  suspended.  In  less  than  a  week  both  houses  had 
resumed  business  by  receiving  special  deposits  in  trust  for  new  accounts. 
Mr.  Clews,  wTho  had  been  worth  $5,000,000  before  the  panic,  had  virtually 
to  begin  again  at  the  foot  of  the  ladder,  and  in  time  bravely  regained  and 
increased  the  fortune  of  his  house. 

Meanwhile  the  export  trade  of  the  country,  at  a  season  when  crops 
demanded  mobilization,  was  virtually  paralyzed  by  the  stagnation  of 
the  foreign  exchange  market,  and  the  Produce  Exchange  passed  a  futile 
resolution  on  Thursday,  September  25th,  asking  Secretary  Richardson 
to  issue  currency  to  the  banks,  upon  evidence  that  gold  had 
been  placed  by  their  correspondents  in  special  deposits  in  Export  busme8a 

1  in  stagnation. 

London  banks,  such  currency  to  be  used  only  in  buying  bills 
of  exchange.  A  flurry  in  gold,  which  rose  two  and  a  half  points,  to  114%, 
occurred  on  Friday,  and  the  gold  shorts  flatly  refused  to  pay  the  necessary 
borrowing  charges,  about  two  per  cent,  a  day.  Drexel,  Morgan  &  Co. 
came  to  their  relief  and  loaned  them  the  gold  at  lower  figures.  Stock 
business  continued  stagnant,  and  the  condition  was  indicated  by  a  falling 
off  in  the  sales  of  stamps  at  the  Post  Office  from  $8,000  to  $6,000  a  day. 
The  week  closed  with  a  cessation  of  stringency,  money  falling  to  seven 
per  cent. 

On  Tuesday,  September  30th,  after  a  ten  days’  suspension,  the  Stock 
Exchange,  which  had  adopted  the  3  o’clock  closing  rule,  re-opened  for 
business,  and  prices  showed  improvement.  But  a  succession  of  fresh 
troubles  followed.  Heavy  declines  marked  October  9  th  and 

**  Stock  Exchange 

13th,  and  on  the  14th  Gillespie,  Trowbridge  &  Co.,  leading  re-opens  after  a 
tea  importers,  and  five  banking  and  brokerage  houses  failed,  suspension  of 
On  the  20th  the  bankruptcy  of  a  great  London  concern,  ten  day8' 
Kimber,  Vivian  &  Co.,  with  liabilities  of  from  £750,000  to  £1,000,000,  was 
reported,  and  the  following  day  the  National  Life  Insurance  Company  of 
New  York  went  to  the  wall.  On  the  22d,  A.  B.  Stockwell,  former  president 
of  the  Pacific  Mail  Steamship  Company,  who  owed  his  corporation  $840,000, 
compromised  with  it  by  agreeing  to  turn  over  10,000  shares  of  the 
company’s  stock  within  the  next  seven  months.  On  the  same  day  the 
savings  banks  of  the  city  were  forced  to  protect  themselves  by  taking 
advantage  of  the  sixty-day  rule. 


1  The  repudiation  of  Georgia  and  Alabama  bonds,  of  which  the  firm  were  large  holders,  crippled 
them. 


272 


THE  NEW  YORK  STOCK  EXCHANGE 


Fluctuations 
in  1873. 


Prices  continued  to  descend,  even  after  currency  payments  were  renewed, 
until,  on  November  7th,  they  reached  the  lowest  level  of  the  panic.  Appended 
is  a  table  indicating  the  extent  of  the  market  depression 
of  this  iconoclastic  year,  the  dates  given  being  respectively : 
(1)  the  high-water  mark;  (2)  the  New  York  Warehouse  and 
Security  Company’s  failure;  (3)  the  day  before  the  Cooke  failure;  (4)  the 
day  of  the  Cooke  failure;  (5)  the  day  following  (another  Black  Friday); 
(6)  the  day  of  the  Stock  Exchange  closing  (September  20th) ;  (7)  the  low- 
water  mark  (November  7th),  and  (8)  the  high  prices  of  December  15th,  when 
substantial  recovery  had  been  made  from  the  depression.  The  quotations 
for  August  11th  and  September  8th,  17th,  18th,  and  19th  are  final  bids. 
The  other  quotations  are  final  sales. 


Stocks. 

Atjg.  11.  Sept.  8. 

Sept.  17.  Sept.  18. 

Sept.  19. 

Sept.  20. 

Nov.  7. 

Dec.  15 

New  York  Central,  . 

105% 

1311 

104 

99  ex.  div. 

96% 

93% 

91% 

77% 

96% 

Harlem, 

129 

127 

124% 

106 

103 

102% 

122% 

Erie,  .... 

59% 

58% 

55% 

54% 

54% 

53% 

35% 

45% 

Lake  Shore, 

94% 

91% 

90% 

87% 

86% 

83 

60% 

77% 

Wabash, 

71% 

65 

55% 

50% 

45 

34% 

54 

North-Western,  . 

67% 

61 

52% 

50% 

46 

40 

34% 

57% 

North-Western,  pref’d 

,  83 
110% 

78% 

75% 

73 

70 

70 

53% 

71% 

Rock  Island, 

107% 

101% 

98% 

91% 

88 

84% 

99% 

St.  Paul, 

52% 

46% 

43 

39% 

35 

32% 

32 

42 

St.  Paul,  preferred,  . 

73% 

69 

67% 

66% 

57% 

58 

43% 

64 

Ohio  &  Mississippi,  . 

40% 

38% 

36 

32% 

30% 

27% 

21% 

31% 

Union  Pacific,  . 

28% 

25% 

23% 

21% 

20% 

73%* 

18 

15% 

32% 

Western  Union,  . 

92% 

90% 

88 

80% 

59% 

45% 

74% 

Pacific  Mail, 

41% 

42% 

42 

38% 

37% 

32 

26% 

40% 

Gold,  .... 

115% 

112% 

111% 

112% 

111% 

111% 

106% 

111% 

It  will  be  observed  that  the  only  stock  which  recovered  the  ground  lost 
in  the  panic  was  Union  Pacific.  Jay  Gould  was  probably  engaged  about 
this  time  in  gaining  control  of  the  company,  and  is  also  believed  to  have 
been  buying  Pacific  Mail. 


Ws. 


CSS 


UT,  unfortunately,  this  was  no  mere  panic  in  stocks.  The  hour  had 
arrived  for  the  nation  to  settle  the  reckoning  for  its  long  debauch  of 
inflation,  for  the  innocent  to  suffer  with  the  guilty,  for  the  clerk  to 
seek  employment  vainly,  and  for  the  workingman’s  child  to  pay  with  hunger 
pangs  the  penalty  of  those  illustrious  triumphs  scored  by  the  gambler  in 
millions.  It  was  the  old  story  of  the  disappearing  bubble.  As 
Ruin  seizes  the  paper  profits  melted,  and  those  who  had  believed  themselves 

c  o  m  IH  6  I*C  i  3/1 

world  rich  discovered  that  they  were  poor,  so  did  the  merchant’s 

goods  gather  dust  upon  his  shelves  for  lack  of  a  buyer,  and 
the  merchant’s  credit  prove  of  no  avail.  The  mill  wheels  were  checked,  the 
operatives  discharged.  Railroad  and  steamship  freights,  at  first  too  heavy 

1  These  two  quotations  are  estimated. 


THE  PANIC  OF  1873 


273 


to  move  in  the  absence  of  a  fluid  currency,  became  too  light  to  provide 
dividends.  Trade  of  all  sorts  found  that  men  of  all  sorts  clung  to  the 
money  they  had  been  used  to  freely  spend.  The  large  retail  shops  of  this 
city  vied  with  each  other  in  advertising  slaughtered  prices,  and  all  over  the 
country,  from  New  England  to  the  Gulf,  and  from  Hampton  Roads  to  the 
Golden  Gate,  commercial  stagnation,  unemployed  workmen,  and  ruin  and 
privation  accompanied  the  return  of  the  people  to  a  solid  basis  for  honest 
endeavor. 

Only  the  briefest  outline  of  the  progress  of  this  commercial  disaster  will 
be  possible.  On  October  27th  the  Dutchess  Print  Works,  and  several  other 
concerns  in  Dutchess  County,  shut  down,  throwing  thousands  of  men  out  of 
work.  In  Paterson,  Newark,  and  other  New  Jersey  towns  similar  catastro- 
phies  occurred.  The  banking  of  Pittsburg  furnaces  speedily  deprived  50,000 
persons  of  a  means  of  support.  Then,  at  the  end  of  October,  the  famous 
Sprague  concerns,  the  A.  &  W.  Sprague  Manufacturing  Company,  of  Provi¬ 
dence,  and  Hoyt,  Sprague  &  Co.,  the  New  York  correspondents,  went  to  the 
wall,  and  an  army  of  10,000  men  went  upon  the  streets. 

Under  the  leadership  of  William  Sprague,  a  United  States  ^eu^Prag;ue 
Senator,  these  concerns  had  for  several  years  been  indulging 
in  great  speculations.  They  held  real  estate  in  Maine,  Rhode  Island,  New 
York,  South  Carolina,  and  Kansas,  and  controlled  a  phalanx  of  minor 
corporations,  producing  cloths,  flax,  sewing  and  mowing  machines,  horse 
shoes,  and  what  not,  and  running  street  car  lines.  They  had  extended  their 
credit  to  the  breaking  point,  and  the  break  came  just  when  they  appeared 
to  dominate  half  of  Rhode  Island.  The  liabilities  of  the  Providence  house 
alone  were  nearly  $11,500,000.  When  one  recollects  how  every  work¬ 
man  thrown  out  of  a  job,  and  every  impoverished  capitalist,  reduces  the 
general  purchasing  power,  it  is  easy  to  see  the  terrible  effect  of  this  one 
disaster. 

All  through  November  the  commercial  panic  raged.  In  New  York  alone 
the  unemployed  were  estimated  at  40,000  souls.  The  municipality  dis¬ 
charged  700  men  because  of  the  difficulty  of  paying  them.  Throughout  the 
country,  establishments  which  did  not  cease  to  run  cut  their  forces  down. 
The  Erie  and  other  railroads  discharged  many  employees.  In 
Tennessee,  Virginia,  and  Kentucky,  a  twenty  per  cent,  cut  in  strikes  caused 
railroad  wages  caused  a  strike  that  stopped  the  trains.  Brick-  ofwages!^8 
layers  in  this  city  were  cut  from  $4  to  $3.50  a  day,  and  build¬ 
ing  strikes  resulted.  By  November  3d  the  express  companies  in  New  York, 
the  coast  steamship  lines,  and  the  Erie  and  New  York  Central  railroads 
reported  a  loss  of  fifty  per  cent,  in  freights,  and  importers,  jobbers,  retailers, 
produce  men,  all  testified  to  stagnation.  The  Rogers  Works  at  Paterson, 
which  had  been  turning  out  one  locomotive  a  day,  cut  their  force  down 


274 


THE  NEW  YORK  STOCK  EXCHANGE 


from  1,700  to  500  men,  and  6,000  mill  employees  were  turned  out  in 
Philadelphia.  Rents  fell  thirty  per  cent,  in  New  York,  and  real  estate  prices 
shrank  proportionately  in  Chicago. 

The  Northern  Pacific  road  wrent  bankrupt  at  the  close  of  the  year  by 
defaulting  on  its  interest  payments.  Among  the  assets  in  the  schedule  of 
J  ay  Cooke  &  Co.  were  loans  of  more  than  $4,000,000  to  the  railroad  on  its 
bonds  and  $1,500,000  on  stock  of  the  Oregon  Steam  Navigation  Company. 
The  total  nominal  assets  of  the  banking  house  were  $15,966,212.17,  the 
liabilities  being  $7,938,409.26.  The  Union  Trust  Company  had  assets  of 
$7,487,295.16  and  liabilities  amounting  to  $6,273,518.52.  It  eventually 
resumed  business,  but  Jay  Cooke  &  Co.,  despite  the  fine  showing  of  their 
condition  on  paper,  went  out  of  existence  as  a  firm.  The  Stock  Exchange 
failures  of  1873  numbered  seventy-nine,  and  of  these  forty-seven  took  place 
after  September  17th. 


XX 

KECUPERATION  AND  RESUMPTION 

0  one  unfamiliar  with  the  confusion  of  thought  that  exists  in 
the  United  States,  with  respect  to  financial  questions,  the 
sharp  controversies  over  the  depression  following  the  great 
railway  panic  are  well  nigh  inconceivable.  Those  who  really 
understood  the  cause  of  trouble  began,  while  trade  was  still 
in  the  throes  of  convulsion,  to  agitate  the  resumption  of 
specie  payments.  Public  speakers  and  public  prints  rang  into  the  ears  of 
our  countrymen  the  dogma  that  national  prosperity  could  be  regained 
only  by  a  return  to  a  sound  and  stable  currency  basis.  Yet  almost  at  the 
same  time  there  arose  another  and  an  extremely  vigorous  school  of 
theorists,  who  insisted  that  the  cure  for  hard  times,  wrought 
by  inflation,  was  a  resort  to  still  further  inflation.  The  The  financial 
financial  homoeopathy  of  this  school  reached  an  extreme  in  the  sch°ols  propose 

A  ^  conflicting 

greenback  delusion  of  good  Peter  Cooper,  and  in  the  “three-  remedies, 
sixty-five  bond  scheme”  which  need  not  here  be  described. 

In  the  milder  measures  of  the  silver  men  it  took  hold  upon  the  minds  of  a 
majority  of  the  people.  The  supporters  of  the  opposing  financial  creeds, 
paradoxical  as  it  appears,  scored  triumphs  for  both  in  a  single  year.  Only 
a  few  months  elapsed  between  the  enactment  which  debauched  the  currency 
anew  and  the  defeat  of  the  bill  to  repeal  the  Specie  Resumption  Act. 

The  five  years  intervening  between  1873  and  1879  were  characterized 
chiefly  by  misfortune  and  misery,  during  a  painfully  slow  recuperation  from 
commercial  distress,  and  during  the  altering  of  currency  conditions.  The 
recuperation  got  merely  its  start  in  this  period.  How  stale  and  unprofit¬ 
able  was  the  stock  market  may  be  deduced  from  the  fact  that  time  after 
time  disasters  which  would  in  happier  days  have  precipitated  a  wild 
scramble  to  sell  were  received  with  impregnable  phlegm.  Prices  were  too 


276 


THE  NEW  YORK  STOCK  EXCHANGE 


low  to  be  driven  lower  by  events  so  common  as  failures 1  or  defalcations. 
Frauds  were  of  frequent  occurrence  and  occasionally  produced  excitement. 
In  February,  1874,  forged  messages,  announcing  heavy  prospective  increases 
of  Western  Union  and  Wabash  (Toledo,  Wabash  &  Western)  shares,  were 
sent  to  the  Exchange  and  read  before  the  Board.  The  stocks  tumbled 
several  points  before  the  sharp  trick  was  discovered. 

The  stock  market  movements  of  both  1874  and  1875  are  records  of 
dulness.  The  Stock  Exchange,  which  in  1873  adopted  the  gratuity  fund 
plan — by  which  a  $10  assessment  on  each  member  of  the  Board  provides 
the  sum  of  $10,000  at  the  death  of  any  member — had  also  fixed  its  hours 
of  session  at  between  10  and  3  o’clock,  no  exception  being  made  of  Satur¬ 
day.  There  still  was  little  occasion  in  the  two  extremely  lean  years  that 
followed  for  any  long  periods  of  trading.  What  speculation  was  evident 
seemed  to  have  Jay  Gould  for  author  and  maintainer.  He  continued  the 
purchasing  of  Union  Pacific  which  was  observed  in  the  panic  of  1873,  and 
thus  eventually  secured  control  of  the  road.  The  stock  reached  38%  in 
March,  1874,  and  by  the  close  of  the  following  year  had  been  advanced  to 
82%.  At  the  same  time  Pacific  Mail  began  a  downward  career — due  to  the 
exposure  of  fraud  in  obtaining  a  subsidy  for  the  company’s  steamers  — 
which  did  not  end  till  its  price  sank  to  the  neighborhood  of  $12  a  share  in 
April,  1877.  Mr.  Gould’s  many  ventures  baffle  calculation,  but  two  should 
not  be  forgotten.  Shortly  after  Horace  Greeley’s  death,  he  had  pur¬ 
chased  and  held  for  a  time  a  substantial  interest  in  the  New  York  Tribune, 
with  the  aims  and  politics  of  which  he  was  in  thorough  sympathy.  Further¬ 
more,  in  the  years  just  subsequent  to  the  panic  he  was  interested  in  a  new 
rival  to  Western  Union,  the  Atlantic  &  Pacific  Telegraph  Company,  and 
was  thus  able  to  institute  a  rate  war  which  proved  of  great  aid  in  his 
Faiiur  f  th  subsequent  operations.  The  Erie  and  Wabash  roads  became 
Erie  and  Wabash  bankrupt  in  1875,  and  were  later  reorganized.  On  July 
roads,  and  of  27th  Duncan,  Sherman  &  Co.,  of  No.  11  Nassau  Street,  one 
man°  &n’cther  largest  banking  houses  of  the  city,  failed,  with  liabilities 

of  about  $6,000,000,  chiefly  because  of  losses  in  cotton, 
extending  over  a  considerable  period.  Their  suspension  came  without 
the  slightest  wrarning  and  caused  a  fall  in  stocks  ranging  between  one  and 
nine  and  three-eighths  per  cent.  In  times  of  greater  inflation  it  might 
have  started  a  panic.  “Up  to  the  latest  moment,”  said  the  firm  in  their 


1  The  following  table,  indicating  the  extent 
here: 

of  American  failures  in  certain  years,  may  be  of  interest 

Tear. 

Failures. 

Liabilities. 

1857,  . . 

. 4,032 

$291,750,000 

1861, . 

. 6,993 

207,210,000 

1863, . 

. 485 

6,864,700 

1873, . 

. 5,183 

228,499,000 

1874, . 

. 5,830 

155,239,000 

RECUPERATION  AND  RESUMPTION 


277 


statement  to  the  public,  “our  unexampled  credit,  having  remained  unim¬ 
paired,  would  have  compelled  us,  if  we  continued  business,  to  hazard  new 
obligations  and  incur  new  confidence,  which  we  were  unwilling  to  assume.” 

In  the  next  month  another  memorable  failure  occurred,  this  time  on 
the  Pacific  Coast.  The  Bank  of  California,  which  had  been  paying  twelve 
per  cent,  on  a  capital  of  $5,000,000,  suspended  payment  at  San  Francisco 
on  August  26th.  Its  president,  William  C.  Ralston,  who  had 
succeeded  Darius  O.  Mills  in  his  official  position,  committed  And  of  the 
suicide  by  drowning.  He  was  a  daring  speculator,  whose  California 
career  had  made  him  an  enviable  figure.  His  ruin  and  that 
of  the  bank  were  produced  by  a  fall  in  the  “bonanza”  mining  stocks,  in 
which  James  R.  Keene  made  his  first  fortune  as  an  operator  on  the  bear 
side.  The  famous  bonanza  kings,  James  W.  Mackay,  James  Fair,  J.  C. 
Flood,  and  William  S.  O’Brien,  all  men  who  had  risen  from  obscurity  to 
wealth  in  the  mining  regions,  had  organized  a  rival  institution  with  equally 
large  capital — the  Bank  of  Nevada — and  had  obtained  supremacy  in  the 
Nevada  mining  regions.  They  all  went  heavily  short  of  their  own  stocks, 
which  Ralston’s  bank  was  carrying  on  margin,  and  precipitated  the 
bonanza  crash.  The  failure  made  a  national  sensation,  but  had  little 
effect  on  the  New  York  stock  market. 


OR  the  sake  of  coherency  it  will  be  found  advisable  to  treat  the 
currency  legislation  of  the  period  between  the  railway  panic  and 
resumption  as  a  theme  by  itself,  and  for  this  purpose  a  simple 
recounting  of  its  chief  features  is  all  that  is  necessary.  The  war-time  infla¬ 
tion  laws  left  the  possible  limit  of  legal  tenders  at  $400,000,000.  It  will  be 
recalled  that  at  the  advent  of  the  crash  in  September,  1873,  there  had  been 
issued  $356,000,000  of  these  notes.  The  remaining  $44,000,- 
000  constituted  a  reserve  which,  in  the  opinion  of  most  men,  Amount  of 
could  be  called  on  in  an  emergency.  On  the  other  hand,  many  l^ga^tendera 
contended  that  the  Secretary  of  the  Treasury  could  not  legally 
issue  one  dollar  of  this  reserve,  save  with  the  special  authorization  of 
Congress,  and  Grant  ostensibly  based  his  refusal  to  put  out  a  fresh  green¬ 
back  issue,  in  mitigation  of  the  1873  panic  stringency,  upon  the  uncer¬ 
tainty  as  to  the  legality  of  the  step. 

Coincidently  with  our  miseries  here,  the  London  market  had  sustained 
a  panic  in  1873,  the  contraction  movement  indeed  becoming  noticeable  on 
every  bourse  in  Europe.  But  England  did  not  call  for  immediate  payment 
of  our  debts  to  her.  For  years  this  country  had  been  borrowing  British 
capital  to  develop  natural  resources,  and  large  quantities  of  our  bonds 
were  also  held  abroad.  The  fall  in  the  prices  of  our  securities  was  mitigated 


278 


THE  NEW  YORK  STOCK  EXCHANGE 


in  British  eyes  by  the  concomitant  rise  of  the  greenback  in  value  and  the 
demand  of  substantial  interests  for  specie  resumption  which  would  bring 
the  greenback  to  par.  Accordingly,  it  happened  that  our  foreign  creditors 
were  willing  to  prolong  their  investments. 

The  crisis  itself  had  produced  the  needed  shrinkage  of  credits  and  prices, 
a  contraction  so  severe  that  it  virtually  discounted  specie  resumption.  It 
was  a  good  thing  to  get  rid  of  inflation,  but  it  would  be  an  extremely  bad 
thing  to  surrender  the  actual  solid  wealth  which  we  had  borrowed  from 


outsiders  to  use  in  our  business — in  other  words  to  export  gold  for  the 
repurchase  of  American  paper  held  abroad.  A  moment’s  thought  will 
show  that  any  step  in  this  delicate  situation  which  might  tend  to  still 
further  shake  the  confidence  of  foreigners  in  our  solvency  would  be  inordi¬ 
nately  foolish.  This  was  precisely  the  step  which  certain  Statesmen  desired 
to  take.  In  1874  they  made  the  effort. 

A  bill  to  inflate  the  currency  anew  was  introduced  in  the  Senate. 
Secretary  Richardson  had  been  forced  to  meet  ordinary  expenses  by  issuing 
$26,000,000  of  fresh  greenbacks— whether  legally  or  illegally — and  the 
total  outstanding  had  reached  $382,000,000.  The  amount  of  bank  notes 
authorized  was  $354,000,000,  and  of  this  sum  all  but  $4,000,000  had  been 
issued.  There  was  also  in  circulation  about  $50,000,000  of 
Fresh  inflation  fractional  currency,  redeemable  at  call  in  legal  tenders.  The 
pioposedrrenCy  new  bill  proposed  to  authorize  beyond  doubt  the  issue  of 
greenbacks  to  the  full  amount  of  $400,000,000,  and  to  permit 
the  increase  of  the  national  bank  notes  to  that  sum.  The  measure  was 
popular.  The  reasoning  of  the  average  man  was  simple.  He  repeated  the 
veteran  syllogism  that  had  done  duty  since  the  days  when  Massachusetts 
colonial  troops  were  paid  in  paper,  and  was  destined  to  serve  in  the 
platform  of  the  silver  shouters  of  1896.  “The  more  money  we  have,”  said 
he,  “the  better  off  we  are.  This  bill  will  give  us  more  money.  Let  us  have 
it  and  we  shall  be  better  off.” 

The  Senate  passed  the  measure  on  March  26, 1874,  and  the  next  day 
gold  moved  upward.  Stock  prices  began  to  sink,  and  they  receded  almost 
continuously  while  the  bill  was  in  the  House,  which  passed  it  on  April  14th. 
Three  days  later  a  delegation  of  bankers,  merchants,  and  others,  among 
them  Cyrus  W.  Field,  visited  the  President  at  Washington  to  protest 
against  this  measure.  The  hero  of  Appomattox  had  resisted  a  similar  dele¬ 
gation  seven  months  before  under  more  trying  circumstances.  He  appeared 
little  impressed  with  the  honor  of  their  visit,  and  listened  with  no  show  of 
excitement.  They  departed,  not  greatly  inspirited,  wondering  if  they  had 
spent  their  time  in  vain.  On  the  20th  a  flurry  took  place  in  the  New  York 
stock  market,  where  anxiety  was  keen.  The  shares  of  the  Cleveland, 
Columbus,  Cincinnati  &  Indianapolis  road  dropped  from  30%  to  20 


RECUPERATION  AND  RESUMPTION 


279 


causing  one  failure.  Gold  the  same  day  ran  above  114.  No  one  could 
imagine  the  decision  forming  in  the  mind  of  the  taciturn,  fearless,  and 
simple-hearted  man  who  had  been  called  to  lead  a  nation  because  he  had 
proved  able  to  lead  an  army.  The  Congress,  his  party,  and 
his  countrymen  clamored  for  the  execution  of  another  piece  of  yeto 

”  r  checks  the  plan. 

folly.  He  was  not  reckoned  a  master  of  finance,  and  the  tide 
was  a  strong  one  to  resist.  Those  of  his  fellow  citizens  who  knew  which 
way  he  ought  to  decide  prepared  to  excuse  him  for  signing  this  obnoxious 
bill  by  recalling  his  service  in  more  thrilling  days.  But  on  April  22d  Grant 
sent  his  veto  to  Congress.  The  inflation  bill  was  dead. 

It  is  easy  enough  in  the  light  of  history  to  perceive  that  the  President 
did  merely  his  plain  duty.  It  was  a  very  different  matter  to  do  that  duty 
at  that  time.  The  performance  was  the  greatest  single  act  of  Grant’s 
service  as  Chief  Executive.  One  need  only  reflect  that  we  might  have  drifted 
into  a  second  abyss  of  disaster,  had  the  principle  contended  for  in  this  bill 
prevailed,  to  realize  that  the  veto  takes  rank  among  the  great  decisions 
recorded  by  the  elected  leaders  of  this  nation. 

The  average  inflationist  of  Grant’s  day  did  not  exhibit  the  hostility  to 
specie  resumption  which  sound  money  advocates  showed  to  greenbackism 
and  the  like.  To  begin  with,  he  was  not  a  logician.  He  did  not  carry  his 
own  reasoning  to  its  proper  conclusion,  for  if  he  had  he  would  have  been 
forced  to  adopt  a  new  creed.  Then  again,  he  felt  a  natural 
pride,  as  an  American  citizen,  m  making  the  American  paper  Resumption  Act. 
note  as  good  as  gold.  On  January  14, 1875,  specie  resump¬ 
tion  became  the  promise  of  the  nation’s  life.  Grant  affixed  his  signature 
to  a  measure  providing  that  on  and  after  January  1,  1879,  the  legal 
tender  notes  should  be  redeemed  in  gold  coin.  This  gave  the  Secretary 
of  the  Treasury  about  four  years  in  which  to  accumulate  the  stock  of  gold 
necessary  to  end  a  period  of  seventeen  years  of  national  insolvency. 

But  no  sooner  had  financial  wisdom  won  this  victory  than  a  consider¬ 
able  part  of  the  public  began  to  clamor  for  a  fresh  folly.  The  most  ardent 
of  the  noise-makers,  the  Adullamites  of  their  time,  chose  the  venerable 
Peter  Cooper  for  their  standard  bearer,  and  Mr.  Cooper  ran  for  the  Presi¬ 
dency  on  a  greenback  platform.  The  election  of  Rutherford  B.  Hayes  on 
November  7, 1876,  which  defeated  Tilden  and  caused  a  long  and  bitter  con¬ 
troversy  over  the  question  of  the  victory’s  fairness,  likewise  overwhelmed 
the  champions  of  fiat  money.  Mr.  Hayes  was  widely  denounced  as  a  fraud 
by  the  Democratic  newspapers  and  politicians.  With  the  merits  of  the 
quarrel  we  need  have  nothing  to  do.  It  should  be  noticed,  however,  that 
something  weakened  the  hold  of  Hayes  upon  his  own  party,  and  it  resulted 
that,  when  Congress  made  the  next  financial  blunder,  Hayes  could  not 
apply  a  remedy. 


280 


THE  NEW  YORK  STOCK  EXCHANGE 


This  blunder  was  the  passage  of  the  Bland  silver  bill  early  in  1878. 
The  country  was  slowly  recovering,  with  the  aid  of  good  crops,  from  the 
hard  times  of  the  preceding  four  years,  but  there  was  still  an  enormous 
amount  of  public  distress  and  dissatisfaction.  Again  the  cry,  “More 
money!”  became  formidable.  It  appealed  as  strongly  to  members  of 
Congress  as  to  their  constituents,  and  it  produced  the  silver  measure  which 
helped  to  precipitate  another  panic  fifteen  years  later.  Silver,  as  compared 
with  legal  tenders,  had  been  worth  between  ninety  and  ninety-two  cents  on 
the  dollar  for  about  six  months  preceding  the  passage  of  the  act.  Prior  to 
the  so-called  “Crime  of  1873”  silver  was  so  valuable  that  none  of  it  was 
coined.  The  “crime”  simply  recognized  a  condition  when  it  demonetized 
the  white  metal  and  did  away  with  the  possibility  of  a  double  standard. 
But  silver  had  since  fallen  very  far  below  parity  with  gold.  The  “crime” 
took  from  it  legally  what  it  had  not  possessed  actually  since  1834 — the 
opportunity  to  become  money  in  some  other  shape  than  frac¬ 
tional  currency  —  and  it  was  characteristic  of  inflationists  to 
reason  that  the  “crime”  had  therefore  caused  the  fall  in 
silver’s  price.  The  Bland  bill  was  designed  to  offset  an  imag¬ 
inary  wrong  by  the  commission  of  an  actual  wrong.  It 
compelled  the  purchase  of  bullion  by  the  Secretary  of  the  Treasury  and  the 
coinage  of  silver  dollars,  weighing  412%  grains  each,  at  the  rate  of  between 
$2,000,000  and  $4,000,000  a  month,  at  his  discretion.  These  silver 
dollars  were  made  redeemable  in  legal  tenders,  a  fact  which  postponed  for 
years,  as  we  shall  see,  the  reaping  of  the  measure’s  evil  fruits.  Merchants 
and  bankers  convened  and  protested  in  vain  against  this  bill.  The  senti¬ 
ment  in  Congress  was  overwhelmingly  in  its  favor.  It  was  passed  after 
many  displays  of  oratory,1  and  President  Hayes  vetoed  it.  On  February 
28,  1878,  Congress  repassed  the  bill  over  the  veto  with  contemptuous 
ease. 

Triumphant  inflation  now  urged  the  repeal  of  the  Specie  Resumption 
Act,  but  this  it  could  not  accomplish.  In  June  Congress  made  greenbacks 
receivable  at  par,  with  gold  for  bonds.  The  gold  premium  had  meanwhile 
been  working  downward  in  a  healthy,  steady  fashion.  Gold  speculation 
had  so  decreased  that  the  Gold  Exchange  had  ceased  to  exist  on  May  1, 
1877,  its  assets  yielding  $260.72  to  each  of  its  486  members,  and  the 
Stock  Exchange  had  leased  the  Gold  Room  and  continued  it  as  a 


Bland  silver 
purchase  bill 
passed  over  the 
veto  of 

President  Hayes. 


1  The  following  excerpt  from  the  speech  of  Senator  Voorhees  of  Indiana,  in  support  of  the  silver  bill, 
and  in  favor  of  a  repeal  of  the  Specie  Resumption  Act,  on  January  15,  1878,  is  an  excellent  example:  “Sir, 
I  have  no  word  of  menace  to  utter  on  this  floor,  but  in  behalf  of  every  laborer  and  every  owner  of  the  soil 
whom  I  represent,  I  warn  all  such  as  value  their  investments  that  when  these  doctrines  of  despotism  are 
sought  to  be  enforced  this  fair  land  will  again  be  convulsed  in  agony  and  the  fires  of  liberty  will  blaze  forth 
again  as  they  did  one  hundred  years  ago  in  defense  of  the  natural  rights  of  men.  [Applause  in  the 
galleries.]  May  the  wisdom  of  our  fathers  and  the  benignity  of  our  God  avert  such  an  issue;  but  if  it  shall 
come,  if  infatuation  has  seized  our  councils,  the  result  will  only  add  one  more  instance  to  the  long  catalogue 
of  human  crime  and  folly,  when  avarice,  like  ambition,  overleaps  itself,  and  in  its  unholy  attempt  to  rob 
others  of  their  possessions  loses  its  own.”  [Great  applause  in  the  galleries.] 


RECUPERATION  AND  RESUMPTION 


281 


Government 
notes  at  par. 


department.1  On  October  14th  gold  was  bulled,  and  the  high  figure  reached 
was  101%.  On  December  17,  1878,  at  12:29  p.  m.,  there  took  place  a 
transaction  that  should  have  made  every  loyal  American 
heart  beat  high.  The  Government  paper  changed  hands  at 
par,  P.  Gimbernat  selling  to  L.  W.  Gillet  $ 10,000  in  gold  for 
$10,000  in  greenbacks.  Shortly  afterward  W.  B.  Sancton  purchased 
another  equal  amount  of  gold  at  par  from  Kennedy,  Hutchinson  &  Co. 

A  trifling  fractional  premium  cropped  up  at  times  in  the  next  two 
weeks.  At  the  close  of  business  on  December  31,  1878,  the  Stock  Exchange 
gold  department  was  abolished.  New  Year’s  Day  being  a  holiday,  the  test 
of  specie  resumption  took  place  on  Thursday,  January  2, 1879.  A  stock 
of  about  $110,000,000  in  gold  coin  had  been  accumulated  in  the  New  York 
Sub-Treasury,  awaiting  the  event.  At  10  a.  m.  Thursday,  a  Resumption  of 
salute  was  fired  at  the  Brooklyn  Navy  Yard.  Flags  were  dis-  specie 
played  by  virtually  all  the  banks,  and  in  the  afternoon  by  the  payment8- 
Stock  Exchange.  The  test  was  met  with  supreme  ease.  Every  dollar  of 
the  $347,000,000  legal  tenders  then  outstanding  was  as  good  as  gold,  and 
easier  to  carry.  In  New  York  the  Sub-Treasury  was  called  upon  for 
very  little  of  the  metal,  and  the  banks  received  more  of  it  than  they  paid 
out.  In  Washington  many  gold  certificates  were  redeemed  in  legal  tenders, 
and  the  actual  result  of  the  day’s  operations  was  an  addition  of  $270,000 
to  the  Treasury’s  gold  balance.  It  was  the  same  story  everywhere.  No 
one  wanted  gold.  After  a  lapse  of  seventeen  years  the  Government  had 
redeemed  its  pledges. 

The  rise  of  the  Granger  movement — the  union  of  farmers  in  the  fruitful 
West  and  Northwest  for  the  purpose  of  marketing  their  crops  under  definite, 
agreed-upon  conditions,  and  so  getting  the  best  possible  prices — was  a 
feature  of  economic  history  in  the  seventies.  The  leaders  of  this  movement 
instigated  legislation  of  a  sort  likely  to  benefit  the  farmers 
and  iniure  the  railroads,  and  a  severe  decline  in  the  market  Granger 

J  legislation. 

value  of  Minneapolis  &  St.  Paul  and  Chicago  &  North-Western 
securities  was  coincident  with  1876  and  the  earlier  part  of  the  following 
year.  Measures  restricting  charges  for  the  service  of  railroads,  grain 
elevators,  and  the  like,  were  sure  to  be  bitterly  fought.  On  one  occasion  an 
Illinois  law,  limiting  the  charges  for  storing  grain  in  cities  of  more  than 
100,000  inhabitants,  was  carried  to  the  United  States  Supreme  Court, 
where  the  farmers,  on  March  1,  1877,  won  a  notable  victory.  During  this 
period  also  a  ruinous  competition  among  railway,  telegraph,  and  coal 
companies,  in  which  warfare  and  combinations  alternated,  helped  to 
unsettle  the  market.  The  leading  operator  at  all  times  was  Jay  Gould, 
and  amid  changing  conditions  he  usually  continued  to  increase  his  fortune. 

1  The  New  York  Stock  Exchange  :  Francis  L.  Eames.  New  York.  1S94. 


282 


THE  NEW  YORK  STOCK  EXCHANGE 


Mr.  Gould  was  at  times  singularly  favored  by  chance.  In  the  early 
part  of  March,  187 6,  he  was  heavily  short  of  stocks.  Western  Union,  which 
had  sold  above  80  in  February,  had  been  hammered  down  thirteen  points 
by  a  rate  war  instituted  by  his  concern,  the  Atlantic  &  Pacific  Telegraph 
Company,  and  he  had  driven  Pacific  Mail  below  19,  besides  bearing  the 
general  list.  On  the  morning  of  the  14th  the  Bank  of  the 
^  st/°k®  of  ??ck  State  of  New  York,  with  a  capital  of  $2,000,000,  suspended 

for  Mr.  Gould.  _ .  ,  ’  _  .  .  r .  .  ’  ’  .  , 

payment.  Richard  Patrick,  the  vice-president,  had  over¬ 
drawn  his  account  by  $230,000,  and  there  were  other  losses  aggregating 
about  $1,000,000.  An  immediate  break  in  the  market  enabled  Mr.  Gould 
to  cover  his  entire  line  with  profit  and  to  earn  the  reputation  in  some 
quarters  of  having  prevented  a  panic. 

Upon  this  same  morning  the  newspapers  announced  the  end  of  old 
Daniel  Drew’s  career  as  a  speculator.  He  had  filed  his  petition  in  bank¬ 
ruptcy  on  the  previous  day,  thus  formally  acknowledging  a  condition 
which  the  Street  had  known  pretty  well  for  months.  Stephen 
And  the  advent  y.  White,  William  R.  Travers,  and  J.  D.  Prince,  the  assignee 
forbDanieiPtCy  Kenyon,  Cox  &  Co.,  were  among  Drew’s  principal  creditors. 
Drew.  A  fortune  that  had  once  risen  to  $13,000,000,  and  a  power 

that  had  earned  him  the  sobriquet  of  “Ursa  Major”  in  ante¬ 
bellum  days,  had  vanished  so  completely  as  to  vindicate  the  teachings  of 
“Uncle  Daniel’s”  religion  on  the  paltry  character  of  this  world’s  goods. 
His  assets  included  a  gold  watch  and  chain,  a  sealskin  coat  — as  familiar 
to  the  Street  as  was  the  spire  of  old  Trinity  — ordinary  wearing  apparel 
worth  $100,  and  family  books,  among  them  a  Bible  worth  $530.  Claims 
against  other  men,  with  doubtful  stocks  and  real  estate,  brought  the 
nominal  assets  to  $678,499.  His  liabilities  were  $1,093,759.  The  Drew 
Theological  Seminary  was  a  creditor  for  $250,000. 

Drew  did  not  survive  his  ruin  many  years.  On  September  18,  1879,  he 
died  at  his  home,  No.  3  East  Forty-second  Street.  He  had  gone  to  bed 
at  9  p.  m.,  apparently  in  perfect  health.  An  hour  later  he  was  about  to 
start  for  his  final  reckoning.  A  doctor  was  hastily  summoned.  The 
patient’s  heart  was  beating  hard.  Drew  opened  his  eyes  and  seemed  to 
be  listening  to  the  whispered  conversation.  An  instant  later  he  quietly 
turned  over  to  the  wall,  and  the  strange  mixture  of  piety  and  cunning 
which  the  Street  had  laughed  at,  and  feared,  and  admired,  and  hated,  by 
turns,  was  beyond  the  ken  of  his  fellow  creatures. 

E|?|p|0MM0D0RE  VANDERBILT  died  on  Thursday,  January  4, 1877,  at 
his  home,  No.  10  Washington  Place,  after  an  illness  of  eight  months’ 
duration,  which  had  so  little  sapped  his  wonderful  strength  of  mind 
that  he  had  directed  a  passenger  rate  war  from  his  sick  bed.  His  death 


RECUPERATION  AND  RESUMPTION 


283 


occurred  shortly  before  11  a.  m.,  and  the  Street  heard  the  news  at  noon,  but 
the  market  was  well  supported  and  the  event  had  long  before  been  dis¬ 
counted.  He  left  a  fortune  estimated  at  175,000,000  to  his 
son,  William  H.  Vanderbilt,  whose  market  career  commenced  vanderbiitdies 
at  this  time.  The  character  of  the  heir  to  the  Vanderbilt  for-  and  is  succeeded 
tune  and  responsibilities  was  soon  to  be  tested.  In  February  in  the  flnaacial 
of  that  year  the  bankruptcy  of  the  Central  Railroad  of  W0lldbj  hl8  80n- 
New  Jersey  became  public,  and  in  April  a  large  Stock  Exchange  house, 
E.  N.  Robinson  &  Co.,  and  a  prominent  operator,  Trenor  W.  Park,  went  to  the 
wall.  Early  in  June  the  influence  of  William  H.  Vanderbilt  began  to  enliven 
the  situation.  Throughout  his  career,  which  lasted  less  than  nine  years, 
Mr.  Vanderbilt  was  a  power,  not  only  as  a  railway  investor 
but  as  a  speculator.  He  is  estimated  to  have  increased  the  Vanderbilt  a 
fortune  bequeathed  him  by  his  father  to  $200,000,000,  and  forceful 
this  result  undoubtedly  was  accomplished  largely  by  specula-  speculator, 
tion.  His  opportunities,  in  the  control  of  important  railway  properties  at 
a  time  when  every  move  looking  to  hostility  or  peace  meant  fluctuating 
prices,  may  be  imagined.  On  June  2d  he  startled  the  public  by  lowering 
the  passenger  rate  between  Chicago  and  New  York  from  $23  to  $15,  and  a 
heavy  break  in  the  trunk  road  stocks  followed.  Battle  for  the  next  year  or 
two  was  an  important  part  of  his  programme. 

In  July,  1876,  he  demonstrated  his  executive  capacity  in  a  remarkable 
fashion.  This  was  the  month  of  the  most  terrible  strike  ever  known  in 
America — that  of  the  railway  employes.  It  was  based  in  some  instances 
on  a  demand  for  increased  wages,  and  in  others  on  a  determination  to  resist 
a  cut.  The  Baltimore  &  Ohio  employes  struck  on  July  16th,  and  rioting 
occurred  at  Martinsburg,  West  Virginia,  and  at  Baltimore  the  following- 
day.  On  the  20th  a  mob  attacked  Federal  troops  in  Baltimore,  and  the 
troops  responded  with  the  rifle,  killing  four  persons  and  wounding  many 
others.  In  the  next  few  days  the  strike  spread  to  the  Pennsylvania  and 
Erie  roads.  The  Governors  of  Maryland,  West  Virginia,  Pennsylvania, 
and  Ohio  issued  riot  orders  and  called  out  the  militia.  The  country  was  in 
a  turmoil.  At  Pittsburg,  Reading,  and  Chicago  there  were  frightful  conflicts 
with  the  police  and  militia,  and  the  dead  and  wounded  were  reckoned  by 
scores.  The  violence  lasted  for  a  fortnight,  and  then  the  law  triumphed, 
the  slaughter  was  ended,  and  the  railroads,  which  had  been  virtually  tied 
up,  resumed  operations. 

Mr.  Vanderbilt  had  never  discontinued  operations.  He  conciliated  the 
representatives  of  the  New  York  Central  and  Harlem  employes  His  handling  of 
who  called  upon  him,  got  them  to  acknowledge  his  previous  the  railway 
considerate  treatment,  and  induced  almost  all  of  them  to  go  8tnke- 
back  to  work.  In  discussing  the  situation  with  a  reporter  he  gave  the 


284 


THE  NEW  YORK  STOCK  EXCHANGE 


public  a  good  insight  into  his  methods  and  policy.  “I  cannot  help  sympa¬ 
thizing,”  said  he,  “with  men  who  are  poorly  paid.  Still,  they  all  feel  as  I 
do,  that  half  a  loaf  is  better  than  no  bread.  If  the  company  pays  more 
than  it  can  earn,  it  is  clear  that  it  will  soon  quit  paying  altogether.  Just 
now  we  are  sailing  very  close  to  the  wind,  and  every  dollar  that  is  spent 
by  the  company  is  expended  with  the  most  rigid  economy.  I  believe  I  know 
where  every  five  dollars  goes.  .  .  .  It  is  my  rule  to  treat  my  people  as 
human  beings — as  men — for  the  most  unwilling  of  all  servants  is  the  man 
who  feels  himself  a  slave.” 

On  August  1st,  when  the  trouble  had  entirely  gone  by,  Mr.  Vanderbilt 
issued  an  open  letter  to  the  12,000  employes  of  the  New  York  Central  and 
Harlem  roads,  announcing  that  the  sum  of  $100,000  would  be  distributed 
among  them.  He  clinched  his  victory  by  promising  them  an  increase  in 
pay  “the  moment  the  business  of  the  company  should  justify  it.” 


Vanderbilt, 
Keene,  Sage, 
and  Gould  as 
market  factors 


ROM  the  summer  of  1877  to  the  following  spring  the  market  was 
characterized  by  continued  strength.  This  was  due  rather  to 
speculation  than  to  improvement  in  business  conditions,  for  times 
were  still  hard,  real  estate  in  the  depths,  and  the  number  of  unemployed  a 
large  one.  Vanderbilt  wTas  on  the  bull  side,  and  James  R.  Keene,  whose 
New  York  career  had  just  begun,  w  as  also  a  heavy  buyer.  Mr.  Keene  had 
come  from  California,  wdiere  he  had  obtained  his  start  by 
buying  shares  in  a  mine  wrhich  proved  rich  and  had  multiplied 
his  fortune  by  selling  other  bonanza  shares  short  just  before 
the  crash.  He  brought  several  millions  in  cash  to  New  York. 
At  first  he  renewed  bear  tactics  in  the  New  York  market,  but 
they  proved  ineffective  and  he  turned  buyer.  For  a  time  Mr.  Keene  was  in 
league  with  Mr.  Gould  and  with  Russell  Sage.  Mr.  Sage  is  a  man  of  extra¬ 
ordinary  capacity  to  judge  the  market  and  keep  a  position  of  vantage 
through  every  peril.  His  eccentricities  are  famous  to-day  throughout  the 
country  and  were  already  well  recognized  at  this  time.  His  success  had 
come  unaided.  Born  in  Verona,  New  York,  in  1816,  he  wrorked  as  a  lad  in 
a  grocery  shop  for  his  brother,  and  when  only  eighteen  years  old  entered 
the  same  business  on  his  owm  account,  at  Troy,  with  another  brother  for 
a  partner.  His  fortune  grew  steadily;  furthermore  he  became  a  figure  in 
politics,  serving  in  Congress  from  1853  to  1857.  He  entered  Wall  Street 
almost  immediately  thereafter  and  profited  immensely  by  the  war  time  rise 
in  the  values  of  securities.  He  began  simultaneously  to  deal  in  “  puts  ”  and 
“calls,”  an  industry  in  which  he  has  never  had  a  peer.  He  wras  a  very 
wealthy  man  in  1877,  and  the  controller  of  much  ready  cash.  Keene 
and  Sage  combined  to  get  control  of  the  Atlantic  &  Pacific  Telegraph 


RECUPERATION  AND  RESUMPTION 


285 


Major  Selover’s 
assault  upon 
Gould. 


Company,  and  in  August  sold  out  to  Vanderbilt,  who  was  at  the  head  of 
the  Western  Union  system.  They  turned  over  71,000  shares  of  the  former 
corporation,  received  22,000  shares  of  the  latter,  and  agreed  that  the 
earnings  of  the  two  companies  should  be  pooled.  The  telegraph  war  was 
thus  temporarily  ended. 

This  truce,  which  rather  left  Mr.  Gould  out  of  consideration,  was  imme¬ 
diately  preceded  by  a  bitter  feud  between  Gould  and  Keene.  They  had 
entered  that  summer  into  an  agreement  to  bull  the  general  market,  with 
the  exception  of  Western  Union.  That  stock  was  to  be  driven  down  to  $40 
a  share,  it  is  said,  and  then  bought  for  joint  account.  Gould 
not  only  made  this  compact,  but  advised  a  satellite  of  Keene, 

Major  A.  A.  Selover,  to  sell  Western  Union  short.  In  the  end 
he  meant  to  buy  it  himself.  Possibly  he  learned  that  the  con¬ 
trol  of  the  Atlantic  &  Pacific  Telegraph  Company  had  been  secured  by 
Keene  and  Sage,  and  wanted  revenge;  but  that  is  not  material.  The 
stock  began  to  advance  with  suspicious  vigor,  and  Keene  and  Selover 
looked  about  them.  They  traced  the  buying  to  Mr.  Gould,  and  Selover 
determined  upon  summary  chastisement. 

At  noon,  on  August  2d,  the  Major,  who  was  about  six  feet  tall  and  of 
powerful  physique,  encountered  Mr.  Gould  at  the  corner  of  Broad  Street  and 
Exchange  Place.  He  detained  his  foe  with  a  few  innocuous  words,  and 
then,  ripping  out  an  oath  and  shouting,  “I’ll  teach  you  what  it  is  to  tell 
lies !  ”  caught  him  by  the  nape  of  the  neck,  shoved  him  over  a  railing  which 
fenced  off  an  area  and  struck  him  repeatedly.  Then  he  dropped  Mr.  Gould 
to  the  bottom  of  the  area  and  went  on  his  way  with  much  satisfaction. 

It  is  characteristic  of  Mr.  Gould  that  he  landed  upon  his  feet.  He  was 
helped  into  a  barber  shop  which  opened  upon  the  area,  and  was  soon  able 
to  go  to  his  office,  where  he  gave  fresh  orders  to  advance  Western  Union. 
The  stock,  which  had  sold  at  60  ten  days  before,  closed  at  74%  this  day,  no 
doubt  entailing  a  further  loss  on  Selover. 

The  same  month  witnessed  the  financial  difficulties  of  the  Hannibal  & 
St.  Joseph  Railroad  Company,  the  stock  of  which  was  destined  to  figure  in 
a  sensational  corner.  Mr.  Gould  entered  into  an  arrangement  with  its 
president  to  lend  the  company  $250,000,  but  the  directorate  repudiated  the 
plan.  The  stock  dropped  sharply  in  October  on  the  news  of  a 
prospective  receivership.  The  latter  part  of  December  was  Failure  of 
marked  by  the  failure  of  John  Bonner  &  Co.  Mr.  Bonner  was 
president  of  the  Bankers’  and  Brokers’  Association,  and  held 
it  in  control.  It  was  a  combined  bank  and  clearing  house  for  brokers.  He 
devoted  his  time  largely  to  borrowing  and  lending  money  in  the  Stock 
Exchange,  of  which  he  was  a  member.  Having  rendered  himself  liable  to 
indictment  by  rehypothecating  the  securities  pledged  with  him  by  his  fellow 


John  Bonner 
&  Co. 


286 


THE  NEW  YORK  STOCK  EXCHANGE 


members  and  others,  he  disappeared,  leaving  balances  of  over  $500,000 
against  him.  His  abilities  and  excellent  social  position  served  to  emphasize 
the  scandal.  It  was  a  trying  period,  and  many  small  houses  were  badly  hit 
by  Bonner’s  peculiarly  aggravating  knavery.  In  J anuary  there  were  several 
other  bad  commercial  failures,  and  the  Bland  bill  was  agitating  the  public 
mind.  The  market  was  well  supported,  the  fact  being  known  that  the  coal 
railroads  were  arranging  anew  the  combination  which  they  had  broken  in 
August,  1876. 

A  season  of  bettering  conditions  now  set  in.  The  telegraph  war  was 
already  out  of  the  way.  The  coal  war  was  ended  toward  the  close  of 
January,  1878,  by  the  formation  of  a  trust,  involving  the  Delaware, 
Lackawanna  &  Western,  the  Pennsylvania  Coal  Company,  the  Delaware  & 
Hudson  Canal  Company,  and  the  Central  Railroad  of  New  Jersey.  Vander¬ 
bilt  was  a  heavy  buyer  of  Lake  Shore,  and  the  bulls  as  a  class  were  in  the 
lead.  Occasional  troubles,  such  as  the  sale  of  the  Erie  Railway  in  fore¬ 
closure,  which  took  place  in  April,  were  easily  endured,  for  most  of  the 
railroads  were  showing  improvement.  This  was  particularly 
Coal  and  rail-  the  case  with  the  Granger  roads.  The  rate  war  instituted  by 

way  combina-  ^  u 

tions  formed.  Vanderbilt  was  working  toward  a  settlement.  This  came  in 
December,  1878,  when  a  new  freight  pool  was  formed.  Messrs. 
Roberts  and  Cassatt,  of  the  Pennsylvania ;  J.  W.  Garrett,  of  the  Baltimore 
&  Ohio ;  H.  J.  Jewett,  of  the  Erie,  and  W.  H.  Vanderbilt,  of  the  New  York 
Central,  met  on  December  5th  at  the  Windsor  Hotel  and  arranged  the 
combination,  to  extend  five  years  from  January  1,  1879,  the  date  of  specie 
resumption.  Albert  Fink  was  reported  arbitrator.  A  new  era  began  under 
better  auspices  and  with  brighter  prospects  than  those  of  the  period  of 
suspension  of  specie  payments. 


XXI 


RAILWAY  WARS  AND  TRUCES 


N  the  two  years  immediately  succeeding  the  resumption  of 
specie  payment  the  country  enjoyed  prosperity  of  the  most 
desirable  kind.  Crops  were  good,  all  branches  of  industry 
revived,  creating  a  brisk  demand  for  labor,  new  enterprises 
were  started,  many  miles  of  new  railway  were  built,  credit 
was  freely  extended,  and  yet  the  expansion  did  not  greatly 
exceed  the  limitations  of  prudence.  Lessons  taught  by  a  hard  master  were 
still  remembered  by  the  people. 

The  early  part  of  1879  witnessed  a  buoyant  stock  market.  While  the 
public  were  buying  heavily  Mr.  Gould  wras  credited  with  being  the  chief 
seller.  Increasing  prices  spread  the  rumor  that  he  was  rapidly  going 
bankrupt  in  an  endeavor  to  withstand  the  advance  of  general  prosperity. 
In  the  columns  of  newspapers  which  he  did  not  control,  his  mental  agonies 
were  gleefully  described.  Nevertheless,  we  venture  to  assert  a  belief  that 
Mr.  Gould  ate  and  slept  as  usual  during  this  period  of  stress.  On  the  17th 
of  February  he  escaped  every  snare  by  selling  100,000  shares  of  Union 
Pacific,  at  between  65  and  70,  to  a  syndicate  from  which  he  coincidentally 
purchased  28,000  shares  of  North-Western  at  62,  possibly  to  cover  short 
contracts.  Union  Pacific  had  sold  at  about  $15  a  share  in  September, 
1873.  As  Mr.  Gould  had  paid  an  average  of  about  $30  for  this  big  block, 
he  was  doing  fairly  well  for  a  ruined  man.  The  syndicate, 
with  whom  he  closed  his  bargain  at  the  old  Windsor  Hotel,  Mr'  Gould 
included  Addison  Cammack,  a  famous  bear,  then  known  as  the  difficulties  °f 
leader  of  the  “Twenty-third  Street  party  James  R.  Keene, 

Charles  J.  Osborn,  Russell  Sage,  David  P.  Morgan,  Frank  Work,  David 
Jones,  and  William  L.  Scott. 

Two  months  later  Mr.  Gould  completed  the  purchase  of  sufficient 
St.  Louis,  Kansas  City  &  Northern  stock  to  ensure  its  absorption  by  the 


288 


THE  NEW  YORK  STOCK  EXCHANGE 


Toledo,  Wabash  &  Western  Railroad,  of  which  he  induced  his  friend  Cyrus 
W.  Field  to  accept  the  presidency.  Wabash  stock  rose  from  17%  to  34% 
between  April  10th  and  April  25th,  and  the  buying  of  St.  Louis  stock 
forced  the  latter  from  8  to  17%  by  May  2d.1  While  conducting  this  move¬ 
ment  Mr.  Gould  was  preparing  a  fresh  telegraph  war.  On  April  29th  he 
incorporated  the  Union — soon  afterward  called  the  American 
grapiThoetinties.  Union  Telegraph  Company,  with  a  capital  of  $10,000,000, 
and  eventually  made  Thomas  T.  Eckert  its  president.  Under 
the  management  of  Mr.  Vanderbilt,  who  was  enabled  to  use  telegraph  wires 
to  great  advantage  in  connection  with  his  railroad  system,  the  Western 
Union  Telegraph  Company  had  been  reaping  a  harvest.  Its  executive  com¬ 
mittee,  on  June  11th,  declared  a  scrip  dividend  of  seventeen  per  cent., 
increasing  the  outstanding  amount  of  capital  stock  to  about  $41,000,000, 
and  a  quarterly  cash  dividend  of  1%  per  cent,  on  both  old  and  new  securities. 
Western  Union  stock  sold  at  116  this  day.  It  was  the  best  price  reached 
for  many  months.  Jay  Gould  extended  the  lines  of  his  new  company,  dis¬ 
placing  those  of  the  Western  Union  to  make  way  for  them,  on  the  Union 
Pacific  and  other  railroad  systems.  By  alternately  cutting  rates  and 
making  peace,  and  by  advertising  his  every  move  in  the  morning  newspapers 
which  he  controlled,  he  produced  a  series  of  tremendous  fluctuations  in 
Western  Union  and  was  thereby  able  to  transfer  large  sums  from  the 
public’s  purse  to  his  own.  Late  in  December,  1880,  Western  Union  sold  at 
78,  Atlantic  &  Pacific  Telegraph  at  32,  and  American  Union  at  70%,  this 
being  the  low  level.  By  January  13, 1881,  the  telegraph  war  having  been 
settled,  with  Mr.  Gould  in  control  of  the  situation,  Western  Union  changed 
hands  at  114%,  Atlantic  &  Pacific  Telegraph  at  49%,  and  American  Union 
at  96.  In  the  following  month  the  Western  Union  Company  absorbed  the 
other  corporations,  increasing  its  capitalization  to  $80,000,000  for  the 
purpose,  and  taking  in  Atlantic  &  Pacific  at  60  and  American  Union  at 
par.  The  Evening  Post,  in  an  editorial  on  February  11th, 
The  ending  of  likened  the  consolidation  to  the  gold  corner  which  produced 

the  telegraph  °  * 

war  involves  Black  Friday,  and  added:  “Both  acts  depended  on  hood- 
large  opportuni-  winking  and  fleecing  the  public.”  Rufus  Hatch  and  other 
latiorT  8PeCU  minority  shareholders  fought  the  merger  in  the  courts.  Pro¬ 
tracted  litigation  ended  in  their  defeat.  The  Gould  control 
of  the  Western  Union  had  begun.  Mr.  Gould’s  company  not  only  owned  a 
majority  of  International  Ocean  Telegraph  stock  but  held  about  half  the 
shares  of  the  Gold  and  Stock  Telegraph  Company,  the  ticker  concern.  It 
absorbed  another  rival  in  the  Mutual  Union  Telegraph  Company,  by  a 
lease  based  on  six  per  cent,  of  the  latter’s  capitalization  of  $7,500,000. 

1  The  new  companies  were  merged  in  the  Wabash,  St.  Louis  &  Pacific  Railway,  which  was  not  organ¬ 
ized  till  November  7,  1879. 


RAILWAY  WARS  AND  TRUCES 


289 


The  elevated  railway  merger  of  this  period  reeked  of  scandal,  suggesting 
the  old  alliances  with  the  judiciary  that  had  made  the  Erie  ring  infamous 
in  the  days  of  Tweed’s  power.  The  Metropolitan  and  New  York  Elevated 
Railroad  companies,  of  which  Sylvester  H.  Kneeland  and  Cyrus  W.  Field 
were  respectively  the  executive  heads,  controlled  the  elevated  structures  in 
this  city.  The  Manhattan  Railway  Company  was  formed,  and  to  this  new 
corporation  the  New  York  and  Metropolitan  were  leased  on  May  20,  1879. 
Jay  Gould  began  a  campaign  to  get  possession  of  the  elevated  roads  two 
years  later.  The  lease  agreement  was  an  extremely  vulnerable  one.  On 
May  18,  1881,  Attorney-General  Ward  brought  an  action,  in  the  name  of 
the  People,  to  vacate  the  Manhattan’s  charter  and  throw  the  company 
into  a  receiver’s  hands,  on  the  ground  that  it  had  never  constructed  a 
road  of  its  own,  that  the  lease  was  illegal  and  was  the  basis  of  an  issue  of 
$11,000,000  of  fraudulent  stock — making  a  total  capital  of  $13,000,000  — 
and  that  the  company  was  insolvent.  Oddly  enough,  on  the  same  day 
a  firm  of  Gould  lawyers,  acting  for  an  obscure  client,  brought  „ 

.  ,  °  °  The  Gould  cam- 

suit  to  prevent  the  Manhattan  from  paying  anything  to  the  Paign  to  secure 
shareholders  of  the  other  two  companies.  The  evidence  is  the  elevated  rail- 
strong  that  both  these  actions  were  instigated  by  Mr.  Gould.  road  system' 
Upon  a  flimsy  pretext  the  Attorney-General  abandoned  his  suit  and  began 
another  at  Kingston,  the  motive  being  to  get  it  before  Judge  Westbrook  of 
the  Supreme  Court,  who  had  once  been  an  attorney  for  Mr.  Gould. 

By  the  use  of  this  and  other  litigations,  liberally  advertised  in  his 
newspapers,  Mr.  Gould  broke  all  the  elevated  stocks.  On  July  8th  his  party 
assumed  control  of  the  Metropolitan,  and  Russell  Sage  was  elected  presi¬ 
dent.  A  week  later  the  market  learned  that  Judge  Westbrook  had  put  the 
Manhattan  company  into  the  hands  of  receivers.  By  a  most  singular 
chance,  these  receivers  were  Judge  John  F.  Dillon,  attorney  for  the  Gould 
Union  Pacific  road,  and  Amos  L.  Hopkins,  vice-president  of  the  Gould 
Wabash  road.  Manhattan  stock  sold  at  18%,  and  those  who  knew  the 
future  had  their  opportunity.  Several  additional  actions  thickened  the 
plot.  In  the  course  of  the  litigation  Judge  Westbrook  came  to  New  York 
and  issued  orders  from  Mr.  Gould’s  private  office.  Mr.  Field  had  taken  a 
position  of  hostility  to  the  invaders,  but,  whether  he  was  an  earnest  foe  or 
a  secret  friend,  he  soon  agreed  to  a  compromise.  A  new  tripartite  alliance 
was  formed  on  October  22d,  and  the  Metropolitan  and  New  York  companies 
were  again  to  be  leased  to  the  Manhattan.  Judge  Westbrook  courteously 
acknowledged  the  altered  conditions  by  annulling  previous  orders,  removing 
the  receivers  and  declaring  the  Manhattan  solvent.  On  November  9th  Jay 
Gould  was  elected  president  of  the  Manhattan,  his  clique  voting  70,000 
shares ;  the  stock  sold  at  55  that  day  and  they  were  estimated  to  have 
made  nearly  $2,500,000  in  the  rise  of  this  security  alone. 


290 


THE  NEW  YORK  STOCK  EXCHANGE 


m 

m 


LL  through  the  summer  of  1879  the  market  was  buoyant,  and  in 
October  prices  were  not  only  booming  but  the  activity  was  so  great 
that  the  brokers  demanded  more  elbow  room,  and  the  Governing 
Committee  of  the  Stock  Exchange  decided  to  buy  additional  property  on 
the  south,  about  twenty-four  feet  on  Broad  and  sixty-eight  feet  on  New 
street,  costing  $375,000. 1  By  November  20th  the  daily  dealing 
break  n  arket  had  reached  681,810  shares,  breaking  all  records,  and  on 
Friday,  November  21st,  a  bear  raid  caused  the  collapse  of  the 
boom.  The  extent  of  the  revulsion  may  be  indicated  by  this  table : 


Shares. 

Number  Sold. 

High. 

Low. 

Erie, . 

.  196,800 

39% 

32 

Erie  preferred, 

. 13,400 

66% 

60 

Lake  Shore,  .... 

.  38,500 

102 

99 

Manhattan,  .... 

.  2,400 

62 

54 

Union  Pacific, 

. 12,900 

86 

73 

Delaware  &  Hudson, 

. 19,200 

73% 

59 

Wabash, . 

. 17,600 

54% 

46 

New  Jersey  Central, 

.  20,200 

77 

70 

This  crash — which  was  followed  by  a  moderate  recovery  on  the  same 
day — was  precipitated  by  the  publication  of  a  report  that  William  H. 
Vanderbilt  had  sold  250,000  shares  of  New  York  Central  to  a  syndicate 
interested  in  the  Wabash  system,  thereby  insuring  the  sending  of  all  Wabash 
east-bound  freight  over  the  Vanderbilt  lines  from  Toledo,  to  the  great 
detriment  of  the  Erie  road.  The  heavy  selling  of  Erie  shares,  which  came 
upon  the  market  at  a  time  when  inflation  had  made  it  vulnerable,  nearly 
produced  a  panic.  Short  covering  by  those  who  had  sold  stocks  through 
foreknowledge  of  the  publication  stayed  the  decline. 

Mr.  Vanderbilt  was,  in  fact,  negotiating  for  the  sale  of  Central  stock  to  a 
syndicate  represented  by  Cyrus  W.  Field,  president  of  the  Wabash  road. 
This  syndicate  included  Drexel,  Morgan  &Co.,  J.  S.  Morgan  &  Co,  of  London ; 
Jay  Gould,  Cyrus  W.  Field,  Russell  Sage,  Solon  Humphrey,  Sidney  Dillon, 
August  Belmont  &  Co.,  Kuhn,  Loeb  &  Co.;  Woerishoffer  &  Co.;  and  others, 
wniiam  h  Van  being  composed  of  Wabash  men  and  foreign  and  domestic 
derbiit  parts  with  bankers.  The  plan  was  perfected  on  November  26th,  Vander- 
the  control  of  the  Lilt  selling  150,000  shares  and  giving  an  option  for  100,000 

New  Y ork  Central.  i  •  ■»  n  •  i  t  xi  *  j  n/r 

more,  which  was  eventually  exercised.  J.  Fierpont  Morgan, 
of  Drexel,  Morgan  &  Co.,  took  a  prominent  part  in  carrying  the  negotiations 
through.  The  price  was  $120  a  share,  or  about  ten  points  below  the 
market,  the  stock  to  be  paid  for  in  United  States  four  per  cent,  bonds,  and 
taken  up  by  the  syndicate  in  monthly  instalments.  Central  stock  this  day 
gained  about  five  points,  closing  at  134%,  and  Wabash  was  also  strong. 


1  The  sale  of  forty  memberships,  increasing  the  number  of  members  virtually  to  1,100,  was  ordered  to 
defray  the  expenses,  and  they  realized  an  average  price  of  $ 13,000,  which  was  $6,000  more  than  their 
price  in  1870.  The  enlargement  of  the  building  was  completed  in  1881. 


RAILWAY  WARS  AND  TRUCES 


291 


The  amount  of  outstanding  Central  stock  was  894,283  shares,  and 
Vanderbilt’s  holdings  were  in  excess  of  500,000  shares  prior  to  this  sale, 
by  which  he  parted  with  the  control.  He  certainly  sold  it  cheap,  for  the 
stock  was  paying  eight  per  cent.,  but  he  accomplished  two  objects,  the 
securing  of  the  east-bound  freight  of  Southwestern  roads,  and  the  allaying 
of  public  alarm  at  the  domination  of  the  railroad  system  by  one  man.  “We 
get  kicked  and  cuffed  by  Congressional  committees  and  legislatures  and 
the  public,”  said  he,  “and  I  feel  inclined  to  let  others  take  some  of  it  instead 
of  taking  it  all  myself.  There  is  a  certain  feeling  among  the  public  about 
one  man  having  so  much  —  I  won’t  say  it’s  wrong  or  that  it’s  right,  but 
there  is  such  a  feeling.  I  am  a  man  who  understands  the  public  sentiment, 
and  I  am  always  ready  to  meet  it.”  The  stock  was  largely  placed  abroad. 
Jay  Gould  individually,  however,  took  at  least  50,000  shares. 


HE  readers  of  this  narrative  are  familiar  with  Mr.  Gould’s  prowess 
as  a  destroyer.  His  constructive  ability  was  not  less  striking  and 
not  wholly  free  from  the  methods  which  brought  hostile  criticism 
upon  him.  Its  greatest  example  was  the  upbuilding  of  the  Southwestern 
system  of  railways,  grafted  on  the  Wabash  system,  the  stem  of  which  arose 
from  Toledo,  at  the  westerly  end  of  Lake  Erie,  where  freight  was  now  to  be 
interchanged  with  the  Vanderbilt  roads.  The  facts  which  immediately 
preceded  and  led  up  to  this  work  of  construction  were  brought  out  beyond 
doubt  in  the  light  of  Government  investigation.1 

In  the  latter  part  of  1879  Mr.  Gould’s  holdings  of  Union  Pacific  stock 
had  decreased  to  about  27,000  shares,  and  he  had  acquired  large  interests 
in  two  rival  roads.  The  Union  Pacific  ran  from  Council  Bluffs,  Iowa,  to  the 
point  of  junction  with  the  Central  Pacific,  five  miles  west  of 
Ogden,  Utah,  a  distance  of  1,038  miles.  Mr.  Gould,  with  The  u“°n’ Kan' 
whom  Mr.  Sage  was  associated  in  the  enterprise,  had  acquired  pacifics  m  1879. 
a  parallel  road  about  640  miles  long,  the  Kansas  Pacific, 
which  ran  from  Kansas  City  to  Denver,  and  which  controlled  another  road, 
the  Denver  Pacific,  running  northward  from  Denver  to  Cheyenne,  Wyoming, 
where  it  connected  with  the  Union  Pacific  line.  Both  the  Kansas  and  the 
Denver  Pacific  roads  were  in  bad  financial  shape.  The  Kansas  Pacific, 
which  had  $9,689,950  of  capital  stock,  had  been  placed  in  the  hands  of 
Henry  Villard  and  Carlos  Greeley  as  receivers  in  1874,  and  they  were  still 
in  control.  As  for  the  Denver  Pacific,  it  was  virtually  bankrupt,  and  could 
have  been  foreclosed  in  three  months’  time.  Of  its  $4,000,000  of  stock, 
10,000  shares  were  owned  by  Gould  outright,  having  been  purchased  at  ten 

1  The  Pacific  Railway  Commission  of  1887,  appointed  by  President  Cleveland,  took  the  evidence  in  the 
case.  Ex-Governor  Robert  E.  Pattison  of  Pennsylvania  was  the  chairman. 


292 


THE  NEW  YORK  STOCK  EXCHANGE 


cents  on  the  dollar,  and  the  remaining  30,000  shares  were  owned  by  the 
Kansas  Pacific  (which  Gould  controlled),  the  latter  company  having  built 
the  Denver  Pacific  line.  These  30,000  shares  were  a  part  of  the  collateral 
security  of  a  funding  mortgage  of  the  Kansas  Pacific  Railway  Company. 
This  mortgage  was  wiped  out  by  a  consolidated  mortgage,  of  which  Jay 
Gould  and  Russell  Sage  were  trustees,  and  the  30,000  Denver  Pacific  shares 
were  therefore  under  their  control,  a  circumstance  which  eventually  inured 
to  their  profit. 

The  Denver  and  Kansas  Pacific  interests  had  quarrelled  with  the  Union 
Pacific  interests  over  the  pro-rating  of  east-bound  freight  at  Cheyenne. 
The  directors  of  the  various  companies  concerned  had  decided  that  the 
^  ,  best  way  out  of  the  quarrel  was  a  merger  of  the  three  roads. 

Quarrel  over  4/  x  0 

freight  leads  to  But  Mr.  Gould  and  his  fellow  directors  in  Union  Pacific  could 
a  plan  of  not  agree  on  the  prices  at  which  he  should  deliver  the  smaller 

consolidation.  railroads.  In  the  fall  of  1879  there  occurred  an  open  break. 

Gould  determined  to  whip  his  fellow  directors  into  line  by  threatening  to 
ruin  the  Union  Pacific,  of  which  he  was  a  director  at  the  time.  This  road 
having  been  built  with  corrupt  extravagance,  and  running  north  of  the 
great  mineral  belt,  could  readily  be  bankrupted  by  a  parallel  line,  built  at 
moderate  cost  and  piercing  the  mineral  belt.  Such  a  line  Mr.  Gould  could 
construct  by  extending  the  Kansas  Pacific  road  from  Denver  through  the 
Loveland  Pass  to  Salt  Lake  City,  and  reaching  the  Central  Pacific,  which 
would  give  him  his  connection  to  San  Francisco.  But  he  needed  more 
length  of  rail  east  of  Kansas  City.  His  Wabash  system  (for  which  he  was 
then  planning  New  York  Central  affiliations)  started  from  Toledo  and  ran 
to  St.  Louis.  Between  St.  Louis  and  Kansas  City  there  was  a  break  in  his 
chain.  To  remedy  the  defect  he  decided  to  purchase  the  Missouri  Pacific, 
which  ran  across  the  State  of  Missouri  and  connected  these  two  cities.  By 
obtaining  this  road  and  building  his  extension  to  Salt  Lake  City  he  would 
get  a  through  line  to  the  Pacific  Coast  and  annihilate  the  Union  Pacific, 
incidentally  wiping  out  the  Government  claim  in  the  latter  property. 

The  Missouri  Pacific  had  a  capitalization  of  only  $800,000,  on  which  it 
was  paying  splendid  dividends.  Half  of  the  stock  was  owned  by  Commodore 
Development  of  B.  K.  Garrison.  Gould  started  for  the  West,  met  Garrison 
a  plan  to  cripple  early  in  November,  and  bought  him  out.  “  I  paid  Mr.  Garrison 
the  Union  Pacific.  759  for  his  Missouri  Pacific  stock,”  said  he  before  the  Pacific 
Railway  Commission.  “You  pay  more  for  a  ruby  than  for  a  diamond, 
and  more  for  a  diamond  than  for  a  piece  of  glass.  I  bought  4,000  shares 
for  $3,000,000.”  He  purchased  at  the  same  time  one  or  two  branch  roads, 
and  a  short  while  later  secured,  from  Oliver  Ames,  of  Boston,  the  control 
of  the  Central  Branch  Union  Pacific  Railroad,  running  from  Atchison 
to  Waterville,  Kansas,  and  comprising  387  miles,  with  its  branches. 


RAILWAY  WARS  AND  TRUCES 


293 


Its  directors, 
seized  with 
panic,  hasten  to 
New  York  and 
agree  to  the 
merger. 


This  simply  strengthened  his  position  a  little.  He  had  made  a  trip  to 
Amsterdam  that  summer  and  purchased  a  quantity  of  Denver  Pacific 
bonds  at  74  from  Dutch  investors. 

Early  in  January,  1880,  he  showed  his  hand.  The  Union  Pacific 
directors  who  had  quarrelled  with  him  were  panic  stricken.  They  rushed 
to  New  York  and  eagerly  assented  to  the  consolidation  of  their  road 
with  the  Kansas  and  Denver  Pacifies  on  Gould’s  own  terms. 

It  was  agreed  to  form  a  new  corporation,  the  Union  Pacific 
Railway  Company,  into  which  the  dividend-paying  stock  of 
the  Union  Pacific  Railroad,  amounting  to  $36,762,000,  and 
the  almost  worthless  securities  of  the  Kansas  and  Denver 
Pacifies,  amounting  to  $13,689,950,  should  all  go  at  par, 
giving  the  consolidated  company  a  stock  capitalization  of  $50,452,250,  a 
bonded  debt  of  more  than  $126,000,000,  and  a  floating  debt  of  about 
$9,666,000.  The  agreement  was  signed  on  January  14th  by  Mr.  Gould 
and  the  Boston  directors,  Frederick  L.  Ames,  Ezra  H.  Baker,  F.  G.  Dexter, 
Elisha  Atkins,  and  by  Sidney  Dillon,  president  of  the  Union  Pacific. 

A  portion  of  the  new  Union  Pacific  stock  to  be  turned  over  was  to  be 
used  in  the  purchase  of  branch  roads,  which  Mr.  Gould  controlled.  He  had 
so  distributed  the  stock  of  these  roads  among  the  men  who  signed  this 
agreement  that  each  one  profited  by  it  individually.1 

Mr.  Gould  made  one  concession.  He  turned  over  to  the  Kansas  Pacific, 
prior  to  the  consolidation,  his  10,000  shares  of  Denver  Pacific  stock  at 
just  what  it  cost  him,  10  cents  on  the  dollar,  and  permitted  the  Kansas 
Pacific  to  turn  it  over  to  the  Union  Pacific  at  par.  It  will  be  recalled  that 
the  Kansas  Pacific  also  held  30,000  shares  of  Denver  Pacific  stock  as 
collateral  for  a  mortgage.  It  was  highly  advisable  to  get  this  stock 
released  so  as  to  exchange  it  at  par  for  new  Union  Pacific,  and  to  do  this 
Messrs.  Gould  and  Sage  took  steps  that  nearly  resulted  in  a  criminal 
indictment  eight  years  later.  They  directed  the  Kansas  Pacific  An  extraordi- 
road  to  bring  an  action  in  equity  against  them  as  trustees  of  nary  legal 
the  consolidated  mortgage,  to  secure  the  release  of  these  proceeding. 
30,000  shares,  and  the  substitution  of  other  collateral.  The  case  went  to 
a  referee.  At  the  reference  Sidney  Dillon  testified  that  these  30,000  shares 
were  worthless,  except  in  view  of  certain  contingencies — by  which,  as  he 
afterward  explained,  he  had  the  consolidation  scheme  in  mind  —  and  those 
contingencies  might  make  them  worth  between  $200,000  and  $300,000. 
The  referee  recommended  the  release  of  the  stock  and  the  substitution  of 
some  $500,000  in  bonds  for  it;  the  Judge  approved  the  referee’s  report, 


1  “The  parties  to  the  agreement,”  says  the  majority  report  of  the  Pacific  Railway  Commission,  “were 
trustees  of  the  Union  Pacific.  They  had  no  right,  without  violating  every  principle  that  should  control 
the  actions  of  honest  men,  to  make  this  bargain  in  the  dark,  without  corporate  action,  and  vote  them¬ 
selves  large  personal  advantages.” 


294 


THE  NEW  YORK  STOCK  EXCHANGE 


and  the  very  next  day  the  stock  which  Mr.  Dillon  swore  would  not  be  worth 
|300,000,  under  any  circumstances,  was  turned  into  the  Union  Pacific  for 
securities  worth  $3,000,000.  The  Kansas  Pacific  Company  got  par  for  its 
own  stock,  incidentally  emerging  from  the  receiver’s  hands,  and  par  for 
its  40,000  shares  of  Denver  Pacific  stock.  Most  of  the  new  Union  Pacific 
stock  which  it  received  for  the  Denver  Pacific  was  used  to  buy  Gould’s 
branch  roads. 

Peace  having  been  declared,  Mr.  Gould  began  to  develop  his  Wabash- 
Missouri  Pacific  system  to  the  West  and  Southwest.  He  sold  his  Central 
Branch  road  to  the  Union  Pacific,  which  leased  it  back  to  the  Missouri 
Pacific,  which  in  August,  1880,  absorbed  the  St.  Louis  &  Lexington  and 
Building  up  of  five  other  small  roads.  The  Wabash  system  had  $42,000,000 
the  great  South-  of  capital  stock  and  controlled  3,348  miles  of  road.  Mr.  Gould 
western  Railway  took  the  presidency  of  the  Missouri  Pacific,  increased  its 
system.  outstanding  stock  to  $12,419,800,  and  its  funded  debt  to 

$19,259,000.  He  secured  control  of  the  Missouri,  Kansas  &  Texas,  which 
had  nearly  $50,000,000  in  bonds  and  stock,  and  which  ran  from  Hannibal, 
Missouri,  just  north  of  St.  Louis,  through  Missouri  and  Indian  Territory  to 
Dennison,  in  the  northern  part  of  Texas.  In  December,  1880,  he  leased 
this  road  to  the  Missouri  Pacific  for  its  net  earnings. 

Meanwhile  he  had  put  his  hands  on  the  Texas  &  Pacific  Railway, 
assuming  the  presidency  of  the  company  in  August,  1880.  This  road  ran 
from  Fort  Worth,  Texas  (which  he  connected  with  Dennison),  eastward  into 
Shreveport,  Louisiana.  In  the  following  June  Mr.  Gould  consolidated  it 
with  the  New  Orleans  Pacific,  thus  extending  his  system  to  the  mouth  of 
the  Mississippi.  The  same  year  he  consolidated  the  St.  Louis,  Iron  Moun¬ 
tain  &  Southern,  which  ran  from  St.  Louis  through  eastern  Missouri  and 
Arkansas  to  Texas,  with  the  Missouri  Pacific,  and  the  International  & 
Great  Northern  with  the  Missouri,  Kansas  &  Texas.  His  system  now 
branched  out  from  the  Wabash,  at  St.  Louis,  through  Missouri,  Kansas, 
Indian  Territory,  Arkansas,  and  Louisiana,  and  he  presently  extended  it 
throughout  Texas,  sending  branches  from  Texarkana  south  to  Houston 
and  southwest  to  Laredo,  on  the  Rio  Grande,  and  from  Fort  Worth  to  El 
Paso,  the  extreme  westerly  portion  of  the  State.  At  El  Paso  he  joined 
hands  with  the  Southern  Pacific,  thus  obtaining  a  connection  with  San 
Francisco,  and  rounding  out  a  magnificent  scheme. 

Early  in  1882  he  united  with  Collis  P.  Huntington,  wdiose  fame  as  a 
railroad  man  was  already  widespread,  in  purchasing  large  interests  in  the 
St.  Louis  &  San  Francisco,  which  ran  from  Pacific,  near  St.  Louis,  to  Seneca, 
Missouri,  with  various  branches,  and  in  the  Atlantic  &  Pacific,  which  w'as 
designed  to  run  from  Seneca  to  the  Colorado  River  and  there  connect  with 
another  branch  of  the  Southern  Pacific. 


RAILWAY  WARS  AND  TRUCES 


295 


In  1883  the  Wabash  was  leased  to  the  St.  Louis,  Iron  Mountain  & 
Southern,  controlled  by  the  Missouri  Pacific.  As  early  as  1880  Mr.  Gould 
took  an  interest  in  a  syndicate  which  acquired  100,000  shares  of  Central 
Pacific  stock. 


SHE  year  1880  was  one  of  the  most  prosperous  years  in  the  nation’s 
history.  Crops  were  abundant,  trade  increased,  and  confidence  was 
general.  The  stock  market  was  dominated  by  the  bulls,  although 
one  bad  break  took  place  in  May,  due  to  the  failure  of  the  Philadelphia  & 
Reading  Railroad  and  its  subsidiary  corporation,  the  Phila-  The  Reading 
delphia  &  Reading  Coal  &  Iron  Company.  The  Reading  smash  of  1880. 
president,  Franklin  B.  Gowen,  had  entered  with  the  other  Slump  in  the 
coal  road  officials  into  the  policy  of  restraining  the  production 
of  anthracite.  He  succeeded  for  a  time  in  increasing  its  cost  to  the 
consumer,  but  eventually  he  ruined  his  own  companies.  He  piled  up  a 
floating  debt  of  between  $4,000,000  and  $5,000,000,  and  staved  off  the  evil 
day  as  long  as  possible.  On  Friday,  May  21, 1880,  the  fact  was  revealed 
that  the  companies  were  insolvent.  Reading  stock,  which  had  sold  above 
70  in  the  preceding  month,  and  at  46%  on  Thursday,  fell  to  30%,  and  closed 
at  31%,  after  sales  of  96,000  shares.  Delaware,  Lackawanna  &  Western 
lost  three  points  that  day  on  sales  of  more  than  100,000  shares,  and  a 
violent  Reading  panic  occurred  in  Philadelphia.  The  coal  roads  had  gone 
through  a  bitter  struggle  in  the  preceding  year,  when  their  pool  was  no 
longer  effective,  and  the  Reading  had  suffered  severely,  its  loss  being 
estimated  at  $7,500,000,  but  the  existing  condition  was  understood  to  be 
that  of  peace.  The  depression  in  the  coal  stocks  lasted  for  several  days, 
its  extent  being  indicated  by  this  table : 


Stock.  Highest,  May  21. 

Reading, . 46% 

Delaware,  Lackawanna  &  Western,  .  .  .  .  79% 

Morris  &  Essex, . 108% 

New  Jersey  Central, . 67% 

Delaware  &  Hudson, . 72% 


Lowest,  May  25. 
18% 

68% 

101 

45 

60 


The  Reading  failure  caused  a  long  and  bitter  fight  with  foreign  share¬ 
holders,  but  the  necessary  reorganization  led  to  Gowen’s  return  to  power 
and  eventually  to  another  collapse. 

On  November  2, 1880,  James  A.  Garfield  was  elected  to  the  Presidency, 
defeating  the  Democratic  candidate,  General  Hancock.  General  Garfield’s 
success  was  encouraging  to  investors,  who  were  sufficiently  reassured  to 
desire  no  great  changes  at  Washington.  The  market  was  well  sustained 
through  the  winter.  The  new  President  entered  on  his  duties  under  a 
bright  sky,  with  the  credit  of  the  nation  so  firmly  established  as  to  permit 
the  refunding  of  Government  sixes  in  three  and  one-half  per  cent,  bonds. 


29G 


THE  NEW  YORK  STOCK  EXCHANGE 


Throughout  the  spring  a  bull  movement  prevailed  on  ’Change  until  the 
May  reports  of  the  Lake  Shore,  Michigan  Central  and  Canada  Southern 
railroads,  all  Vanderbilt  properties,  indicated  a  sharp  falling  off  in  earn¬ 
ings.  A  railroad  year  less  prosperous  than  its  predecessor  had  set  in. 

President  Garfield  was  shot  by  Charles  Jules  Guiteau  on  the  morning  of 
Saturday,  July  2d,  while  entering  the  depot  of  the  Baltimore  &  Potomac 
Railroad  at  Washington,  to  take  the  train  for  a  trip  through  New  England. 

He  was  carried  in  an  ambulance  to  the  White  House,  and 
Assassination  of  thence  removed,  on  September  6th,  to  a  cottage  at  Elberon, 
fieid8.ldent  °ar  New  Jersey,  where  he  died  on  the  evening  of  September  19th. 

His  assassin  was  a  French-Canadian,  who,  while  scarcely 
able  to  buy  a  night’s  lodging,  had  been  hanging  about  Washington  in  the 
endeavor  to  persuade  the  President  to  give  him  the  Austrian  ministry. 
Many  who  knew  him  believe  to-day  that  he  was  insane,  without,  however, 
regretting  that  he  was  hanged. 

The  market  broke  sharply  on  the  morning  of  the  shooting,  and  through¬ 
out  the  remainder  of  the  summer  fluctuated,  in  sympathy  with  the  news  of 
the  President’s  condition,  a  particularly  bad  break  coming  on  July  23d, 
when  tidings  of  a  relapse  was  received.  Yet  when  the  end 
came  the  dealers  in  stocks  had  discounted  it,  and  prices 
were  firm.  The  greater  part  of  the  decline  took  place  some 
time  afterward,  when  the  effect  of  poorer  crops  was  felt.  Closing  prices  on 
important  days  were  as  follows : 


Its  effect  on 
the  market. 


Stock. 

July  1. 

July  2. 

July  23. 

Sept.  19. 

Sept.  20. 

Dec.  24. 

Canada  Southern, 

68% 

66% 

64% 

65% 

66% 

58% 

Central  Pacific,  .... 

99% 

97 

92% 

91% 

91% 

93% 

Chicago,  Burlington  &  Quincy, 

164 

162% 

157 

161 

161% 

135 

North-Western,  com., 

106% 

104 

122% 

125% 

127 

124% 

St.  Paul, . 

127% 

124% 

110 

119% 

121 

103% 

Delaware,  Lackawanna  &  Western, 

124% 

122% 

119% 

125% 

127 

127% 

Hannibal  &  St.  Joseph,  com., . 

91% 

91 

91% 

95% 

“  “  pref.,  . 

116% 

115 

109% 

118% 

118 

111% 

Lake  Shore, . 

126% 

124% 

121% 

126 

127% 

115% 

Erie, . 

62% 

58% 

54% 

53 

55% 

35 

Manhattan,  .  ... 

26 

24% 

17% 

54% 

New  York  Central, 

146% 

145 

142 

142% 

144 

132% 

Reading, . 

60% 

57 

56% 

63% 

65% 

66% 

Union  Pacific,  .... 

131% 

128% 

126% 

122% 

123% 

115% 

Western  Union,  .... 

91 

88% 

86% 

88% 

89% 

78% 

Northern  Pacific, .... 

45 

40% 

38% 

39% 

39% 

3o% 

It  was  while  the  President  was  lingering  on  his  death-bed  that  the 
corner  in  Hannibal  &  St.  Joseph  common  stock  was  forced 
I^Wo^ph1  completion,  and,  though  apparently  a  technical  success, 

corner.  stripped  its  author  of  the  bulk  of  his  fortune.  The  Hannibal 

&  St.  J oseph  Railroad  was  at  this  time  an  independent  line, 
running  across  the  northern  part  of  Missouri  from  Hannibal,  on  the 


RAILWAY  WARS  AND  TRUCES 


297 


Mississippi  River,  to  St.  Joseph,  on  the  Kansas  River.  With  its  branches 
the  road  comprised  282  miles.  The  outstanding  stock  consisted  of  common 
shares  to  the  par  value  of  $9,168,700,  and  of  preferred  shares  to  the  par 
value  of  $5,083,024.  The  railroad  had  seen  prosperous  times  in  1880,  but 
in  1881  its  revenue,  like  that  of  almost  every  other  line,  had  fallen  off,  and 
the  line  was  earning,  in  addition  to  the  dividend  on  the  preferred,  only 
about  one  and  one-half  per  cent,  on  the  common  stock.  This  circum¬ 
stance  induced  a  number  of  operators  to  sell  it  short.  James  R.  Keene 
and  Russell  Sage  were  supposed  to  be  among  them,  but  whether  this 
was  the  case  or  not,  Amos  L.  Hopkins,  of  the  Gould-Sage  clique,  certainly 
was  so.  William  Dowd,  a  prominent  New  Yorker,  was  president  of  the 
road.  The  vice-president  was  John  R.  Duff,  a  Bostonian,  who  had 
recently  come  into  a  large  fortune  and  was  using  it  freely  in  speculation 
through  the  office  of  Kennedy,  Hutchinson  &  Co. 

William  J.  Hutchinson  of  that  firm  was  not  only  a  broker  of  enviable 
standing  but  a  leader  in  church  affairs  in  this  city.  This  did  not  prevent 
his  conducting  a  series  of  operations  by  which  his  wealthy 
customer  was  systematically  cheated.  As  Mr.  Duff  was  out  Mr-  Duff  Put8 
of  the  city  and  put  his  affairs  into  the  hands  of  his  brokers  ^  ^nds  of  a 
with  perfect  confidence,  giving  them  written  instructions  to  betrayer, 
use  their  own  discretion,  an  unscrupulous  agent  had  such 
a  principal  at  his  mercy.  Mr.  Duff  began  through  these  brokers 
to  buy  all  the  Hannibal  &  St.  Joseph  common  stock  which  the  bears 
were  willing  to  sell.  The  dealing  was  very  moderate,  but  the  price 
had  been  forced  above  97  by  Monday,  September  5th.  On  the  follow¬ 
ing  day  the  attempts  of  the  shorts  to  cover  revealed  the  situation. 
Hannibal  &  St.  Joseph  common  opened  at  98  and  rose  in  leaps  till 
137  was  vainly  bid  for  it  at  the  close.  Yet  the  sales  had  amounted 
to  no  more  than  1,800  shares.  On  Wednesday,  when  2,700  shares 
were  sold,  the  price  climbed  to  200,  and  the  next  day,  September  8th, 
the  Stock  Exchange  being  closed,  the  Governor  having  chosen  this  date 
for  general  prayer  in  behalf  of  the  President’s  recovery,  the  bears  had  time 
to  conceive  a  means  of  escape.  On  Friday  Amos  L.  Hopkins  brought  an 
action  before  Judge  Donohue,  charging  that  Mr.  Dowd,  the  president  of 
the  road,  was  in  a  conspiracy  to  corner  the  stock,  and  obtained  an  order 
to  show  cause  why  Dowd  should  not  be  compelled  to  issue 
common  stock  in  exchange  for  convertible  bonds,  complying  matures  and  the 
with  a  decision  reached  by  the  directors  in  the  previous  bears  carry  their 
June.  Hopkins  was  short  300  shares  through  the  office  of  CclMet0C0Ult- 
W.  E.  Connor  &  Co.1  The  stock  this  day  sold  between  160  and  225, 

1  The  firm  had  been  formed  but  a  short  while.  Jay  Gould  having  invested  $300,000  in  it  as  a  special 
partner.  It  comprised  his  son  George  J.  Gould,  Washington  E.  Connor,  and  Giovanni  P.  Morosini. 


298 


THE  NEW  YORK  STOCK  EXCHANGE 


only  650  shares  being  covered.  On  Monday,  Hopkins  procured  an  injunc¬ 
tion  forbidding  Kennedy,  Hutchinson  &  Co.  and  W.  E.  Connor  &  Co.  from 
dealing  in  the  stock.  There  was  no  further  sale  till  Wednesday,  when 
the  holder  of  five  shares  put  them  on  the  market  and  got  par,  while  on 
Thursday,  100  shares  sold  at  300,  and  on  Friday,  September  19th,  the 
stock  touched  350,  the  high  price  of  the  corner. 

The  Hopkins  litigation  was  ultimately  settled  out  of  court.  This  was  a 
comparatively  small  matter.  Mr.  Hutchinson  was  privately  undertaking 
another  settlement — that  of  the  outstanding  short  contracts.  The  fact 
was,  that  he  was  the  only  man  short  of  a  great  portion  of  the  stock,  and 
he  used  his  position  as  broker  to  make  such  settlements  as  broke  the  price 
in  due  time  and  nearly  ruined  Mr.  Duff.  Eventually  the  matter  was  carried 
to  the  Governing  Committee  of  the  Exchange.  On  June  6, 
Vanishing  of  1882,  the  Exchange,  in  view  of  this  and  other  betrayals  of 
Duff’s  confidence,  expelled  William  J.  Hutchinson  “for  obvious 
fraud.”1  Duff  was  saddled  with  about  90,000  shares  of  the 
common  stock,  practically  the  whole  issue,  which  he  succeeded  in  having 
carried  by  prominent  brokerage  houses  for  a  considerable  period.  In  the 
following  March,  Messrs.  Gould,  Sage,  and  others  purchased  it  at  $42  a 
share.  In  April,  1883,  they  turned  it  over  at  higher  figures  to  the  Chicago, 
Burlington  &  Quincy  Railroad. 


Mr.  Duff’s  paper 
profits. 


BULL  movement  in  one  or  two  stocks  occurred  in  the  late  part  of 
the  winter  of  1881-82.  The  most  sensational  advance  took  place 
in  the  common  stock  of  the  Richmond  &  Danville  road,  which  had 
sold  as  low  as  99%,  in  1881,  and  was  pushed  up  by  a  clique  to  263  on 
February  21st,  and  fell  to  130  on  February  23d,  in  the  course  of  only  1,800 
shares’  trading.  The  year  1882  was  chiefly  characterized, 
however,  by  reverses.  The  Union  Generale,  of  Paris,  a  banking 
concern  with  deposits  of  100,000,000  francs,  failed  on  January 
30th,  and  spread  disturbance  through  the  foreign  bourses.2 
European  holders  began  to  return  us  our  securities,  and  gold 
was  exported  to  pay  for  them.  The  poor  crops  of  1881  had,  of  course, 


Failure  of  the 
Union  Generale. 
The  year  1882 
marked  by 
adversity. 


1  Early  in  the  year  1882  Mr.  Duff  forced  Mr.  Hutchinson  to  surrender  $750,0(JO  to  him,  about  half  the 
amount  of  which  he  had  been  robbed.  This  transaction  set  afoot  stories  as  to  the  honesty  of  Hutchinson’s 
dealing  and  on  one  occasion  resulted  in  a  personal  encounter  between  two  brokers  on  the  floor  of  the 
Exchange.  Mr.  Hutchinson  finally  demanded  an  investigation  by  the  Exchange,  and  a  committee  was 
appointed  which  heard  the  evidence  and  recommended  his  expulsion. 

2  In  March,  1882,  not  only  Wall  Street  but  the  financial  marts  in  various  other  cities  were  filled  with 
rumors  that  Jay  Gould  was  liquidating  his  stocks  and  was  on  the  verge  of  insolvency.  On  March  13th,  in 
the  presence  of  Russell  Sage,  Cyrus  W.  Field,  and  Frank  Work,  who  were  called  to  his  office  for  the  purpose, 
he  displayed  securities  of  the  par  value  of  $53,000,000,  the  great  bulk  of  w’hich  were  unendorsed,  showing 
that  they  had  never  been  sold,  loaned,  or  hypothecated.  These  assets  included  about  $23,000,000  of 
Western  Union  stock,  selling  at  78;  $12,000,000  of  Missouri  Pacific,  selling  at  91,  and  $18,000,000  of 
Manhattan,  Wabash,  and  Southwestern  stocks.  Mr.  Gould  offered  to  display  $20,000,000  of  bonds  in 
addition,  but  his  visitors  spared  him  the  trouble.  This  exhibition  had  the  effect  of  temporarily  aiding 
the  market. 


RAILWAY  WARS  AND  TRUCES 


299 


reduced  railway  earnings,  and  a  rate  war  was  renewed  early  in  1882,  and 
helped  to  depreciate  prices  all  through  that  year.  There  was  an  upward 
turn  in  July,  but  the  autumn  saw  a  reduction  in  the  iron  trade,  due  to 
overproduction,  while  the  combination  of  the  usual  crop-moving  stringency 
at  that  period,  with  the  continuance  of  the  railway  war,  broke  the  market 
again  and  spread  an  uncomfortable  feeling  on  the  Street. 

One  important  event  this  year  demands  attention — the  unloading 
of  the  New  York,  Chicago  &  St.  Louis  Railroad,  commonly  called  the 
“Nickel  Plate,”  upon  the  hands  of  William  H.  Vanderbilt.  This  was  a 
project  of  the  so-called  Seney  syndicate,  of  which  George  I.  Seney,  Calvin  S. 
Brice,  and  Samuel  Thomas  were  leading  members.  The  rail¬ 
road  law  at  the  time  made  it  perfectly  feasible  for  any  one  Kate**16 

possessed  of  the  requisite  means  and  audacity  to  parallel  any  road. 
railroad  with  a  new  line,  which  the  proprietor  of  the  old  one 
must  buy  or  take  the  risk  of  insolvency.  The  Seney  syndicate  had  organ¬ 
ized  the  “Nickel  Plate”  road  in  April,  1881,  to  parallel  the  Lake  Shore. 
It  was  designed  to  run  from  Buffalo  to  Chicago,  via  Fort  Wayne,  Indiana. 
The  company  issued  $28,000,000  of  common  and  $22,000,000  of  preferred 
stock,  $15,000,000  of  first  mortgage  and  $4,000,000  of  income  bonds. 
On  April  26th,  the  line  having  been  completed  from  Chicago  to  Black 
River,  Ohio,  about  310  miles,  the  Stock  Exchange  listed  all  the  stock  and 
half  of  the  mortgage  bonds.  The  common  sold  at  16,  the  preferred  at  35, 
and  the  bonds  at  89;  but  these  prices  were  not  long  obtainable.  The 
common  fell  in  June  to  10%  and  the  preferred  to  27%,  while  Lake  Shore, 
which  had  sold  at  120  in  April,  sank  to  98  in  June,  when  the  directors 
labored  to  arouse  it  by  declaring  a  two  per  cent,  quarterly  dividend  which 
it  had  taken  six  months  to  earn.  In  September  the  shares  of  the  Lake 
Shore  and  of  its  audacious  rival  had  both  recovered  most  of  the  lost 
ground.  On  October  26th  the  market  learned  that  Vanderbilt  had  bought 
out  the  “Nickel  Plate”  on  behalf  of  the  Lake  Shore  road,  paying  17  for 
the  common  and  37  for  the  preferred. 

Mr.  Vanderbilt  has  been  criticised  for  this  purchase  on  the  score  of  the 
impending  bankruptcy  of  the  “Nickel  Plate”  road.  Undoubtedly  if  he 
had  waited  awhile  he  could  easily  have  bought  it  in  at  fore- 
closure— provided  no  one  secured  it  meanwhile.  It  did  go  a  bankrupt  road, 
into  a  receiver’s  hands  in  March,  1885,  and  was  reorganized 
two  years  later.  But  Jay  Gould  was  thought  to  be  after  it  in  1883,  and 
was  reported  to  have  bid  15  for  the  common  and  35  for  the  preferred,  and 
Mr.  Gould  could  no  doubt  have  made  use  of  the  property,  if  he  had  been 
so  disposed,  which  would  have  seriously  crippled  the  Vanderbilt  interests. 

Late  in  December  the  officials  of  the  northwestern  roads,  having  battled 
most  of  the  year,  met  and  agreed  on  terms  of  peace,  and  the  stock  market 


300 


THE  NEW  YORK  STOCK  EXCHANGE 


was  gravely  informed  that  the  rate  dispute  was  settled.  In  January,  1883, 
William  K.  Vanderbilt  w~as  elected  president  of  the  “Nickel  Plate.”  His 
father,  in  the  following  May,  laid  down  the  trying  duties  of  the  presidencies 
of  the  New  York  Central  and  Lake  Shore  roads. 


XXII 

AN  ERA  OF  IMPAIRED  CONFIDENCE 

E  students  of  history  who  hold,  with  Carlyle,  that  it  is 
chiefly  a  record  of  the  work  of  a  few  great  men,  will  doubt¬ 
less  find  in  the  annals  of  Wall  Street  evidence  to  support 
their  theory.  Leadership  is  nowhere  more  pronounced  than 
in  the  New  York  stock  market.  Nowhere  is  it  more  effective 
in  achieving  results.  The  market  is  made  by  the  great  army 
of  investors  and  speculators,  not  by  the  few  brilliant  manipulators.  But 
the  few  contrive  almost  all  of  the  sensations — almost  all  of  the  great 
schemes  through  which  fortunes  accumulated  in  ordinary  business  channels 
are  deftly  withdrawn  from  their  original  owners  by  the  operator’s  art. 

In  the  period  between  1882  and  the  summer  of  1886  there  were  several 
occasions  of  extraordinary  speculative  disturbance,  distinctly  traceable  to 
the  work  of  a  few  men.  Of  these  persons  Henry  Yillard  was  the  only  one 
who  carried  through  a  really  constructive  enterprise.  To  his  faith  and 
genius  a  great  transcontinental  highway,  the  Northern  Pacific  road,  owes 
its  completion.  So  far  as  his  own  fortunes  and  those  of  his  allies  were 
concerned,  he  failed  of  success,  for  he  had  to  combat  with  unfavorable 
conditions,  and,  it  must  be  admitted,  his  project  was  somewhat  too  far  in 
advance  of  the  times.  But  he  has  left  a  record  of  good  intent,  large  fore¬ 
sight  and  energy.  His  gifts  were  beyond  question,  and  their  net  result 
was  a  contribution  toward  the  material  progress  of  his  country.  A  contem¬ 
poraneous  figure,  strongly  contrasting  with  Mr.  Villard’s,  was  that  of  one  of 
the  greatest  pure-and-simple  speculators  ever  known  in  Wall  Street,  Charles 
F.  Woerishoffer.  The  former  was  a  builder  up.  The  latter,  though  a  man 
remembered  for  admirable  qualities,  can  scarcely  lay  claim  to  such  a  title, 
however  he  may  have  coveted  it.  The  distinction  should  be  borne  con¬ 
stantly  in  mind,  all  the  more  so  because  the  contest  in  which  these  vigorous 
fighters  were  arrayed  against  each  other  resulted  in  Woerishoffer’ s  victory. 


302 


THE  NEW  YORK  STOCK  EXCHANGE 


Ferdinand  Ward  likewise  played  a  leading  part  in  the  period  under 
discussion,  but  his  character  forbids  us  to  rank  him  with  Villard  or  Woeris- 
hoffer.  Prominent  he  certainly  was  in  the  day  of  his  triumphs  and  in  the 
hour  of  his  downfall.  But,  when  all  is  said,  one  sees  him  as  merely  the  chief 
examplar  in  Wall  Street  of  the  methods  of  the  confidence  man. 


ENRY  YILLARD  was  a  Prussian  by  birth,  a  former  newspaper  corre¬ 
spondent  at  Washington,  who  made  his  way  into  finance  by 
obtaining  the  receivership  of 
the  Kansas  Pacific  road.  In  the  summer 
of  1879,  a  short  while  before  that  rail¬ 
road  emerged  from  the  hands  of  its 
receivers,  Mr.  Villard  organized  the  Ore¬ 
gon  Railway  &  Navigation  Company, 
with  the  aid  of  W.  H.  Starbuck,  James 
B.  Foy,  J.  N.  Dolph,  Artemas  H.  Holmes 
and  others.  These  gentlemen  raised 
the  sum  of  $100,000  and  paid  it  as  a 
bonus  to  the  Oregon  Steam  Navigation 
Company  and  the  Oregon  Steamship 
Company  for  an  option 
on  the  properties  con¬ 
cerned.  Their  own  com¬ 
pany  was  capitalized  at  $6,000,000  of 
stock  and  $6,000,000  of  bonds,  the 
mortgage  for  the  latter  being  executed 
at  Portland,  Oregon.  Mr.  Villard  came 
East  and  succeeded  in  negotiating  his 
securities  with  George  M.  Pullman  and 
others.  The  capital  stock  of  the  Oregon 
Railway  &  Navigation  Company  had  been  increased  by  December,  1882, 
to  $18,000,000,  while  scrip  certificates  to  the  amount  of  $1,200,000  were 
outstanding.1 


Rise  of  Henry 
Villard. 


HENRY  VILLARD. 


1  The  steamship  companies  brought  to  the  control  of  the  Oregon  Railway  &  Navigation  Company 
in  1879  four  ocean  steamers,  twenty-eight  steamboats  (serviceable  for  use  on  the  Columbia  River),  five 
barges,  and  seven  wharf  boats.  In  December  of  this  year  the  railway  line  of  the  company  was  only  about 
100  miles  long,  running  from  Wallula  Junction  westward  to  Celilo,  Oregon.  In  the  following  June,  George 
M.  Pullman,  of  Chicago,  and  William  Endicott,  Jr.,  of  Boston,  entered  the  directorate.  The  road  then  ran 
from  Walla  Walla  west,  through  Wallula  Junction,  to  The  Dalles,  Oregon,  a  distance  of  158  miles,  and 
was  paying  eight  per  cent,  dividends.  The  company’s  statement  of  December,  1883,  wrhen  the  road  had 
been  completed  to  Portland  and  branches  in  operation  swelled  its  total  mileage  to  592  miles,  showed 
124,000,000  in  stock,  $5,753,000  in  bonds,  and  $1,200,000  in  scrip  certificates.  Henry  Clews,  who  was 
an  active  operator  and  broker  at  the  time,  estimates  that  the  assets  of  the  company  in  1879  were  worth 
only  $3,500,000.  If  it  be  assumed  that  the  additional  492  miles  of  road  built  in  December,  1883,  cost 
$10,000,000,  which  is  certainly  a  liberal  sum,  and  that  $2,000,000  more  may  have  been  spent  for  addi¬ 
tional  steamboats  and  other  equipment,  the  result  is  a  capitalization  of  about  $31,000,000  on  the 
basis  of  assets  worth  only  half  that  amount.  The  road  was  still  paying  eight  per  cent,  dividends. 


AN  ERA  OF  IMPAIRED  CONFIDENCE 


303 


Meanwhile  Mr.  Villard  had  induced  the  capitalists  whom  he  had 
interested  in  this  road  to  extend  their  lines.  The  Oregon  Railway  & 
Navigation  Company  was  designed  to  connect  Portland,  Oregon,  with 
Wallula  Junction,  Washington  Territory,  by  a  road  about  212  miles  long, 
running  along  the  Columbia  River.  At  its  easterly  terminus,  Wallula 
Junction,  it  touched  the  line  of  the  Northern  Pacific  road,  which  ran  west¬ 
ward  to  that  point.  At  Portland  another  connection  with  the  same  rival 
was  projected,  for  the  Northern  Pacific  had  a  branch  running  north  from 
Kalama  to  New  Tacoma,  Washington  Territory,  on  the  Puget  Sound,  and 
was  to  build  from  Portland  to  Kalama.  Now,  the  Northern  Pacific  road 
wras  planned  to  run  from  Ashland,  Wisconsin,  and  Duluth, 

Minnesota — both  on  Lake  Superior — across  Minnesota,  North  Raiiwa^tua- 
Dakota,  Montana,  Idaho,  and  Washington  Territory,  by  the  tion  threatened 
“Yalley  Route,”  to  the  Pacific  Coast.  At  this  time  it  was  by  the Northern 

v  7  Pacific. 

only  partially  built,  the  construction  work  having  been 
abruptly  halted  by  the  panic  of  1873.  The  road  had  been  sold  in  foreclosure, 
August,  1875,  to  anewNorthern  Pacific  Railroad  Company .  This  company 
had  $49,000,000  of  common  stock,  about  $42,300,000  of  eight  per  cent, 
preferred  stock,  and  a  funded  debt  of  about  $21,600,000,  on  June  30, 1881, 
and  its  statement  showed  some  $140,000,000  in  proceeds  of  land  sales 
and  in  surplus.  At  this  time  it  had  about  1,200  miles  built,  or  in  process 
of  construction,  but  had  operated  for  revenue  only  754  miles  in  the  year 
then  ended. 


HHE  requirements  of  the  property,  as  every  one  knew,  would  compel 
the  road’s  completion  at  least  to  the  branch  which  ran  from  Lake 
Pend  d’Orielle,  Idaho,  to  Wallula  Junction,  Washington  Terri¬ 
tory.  A  glance  at  the  map  will  show  that  if  it  were  extended  west  from 
Wallula  Junction  to  the  Puget  Sound  it  would,  possessing  the  advantage 
of  a  through  route  to  the  region  of  the  Great  Lakes,  certainly  cripple  and 
possibly  ruin  the  Oregon  Railway  &  Navigation  Company,  in  case  the 
latter’s  road  should  be  extended  to  Portland.  But  by  connecting  the  two 
properties  a  strong  combination  could  be  made,  and  the  additional  con¬ 
struction  planned  to  carry  Northern  Pacific  trains  from  Wallula  across 
Washington  to  the  Pacific  Coast  could  be  saved. 

The  Villard  party  had  also  acquired  control  of  the  Oregon  &  California 
Railroad,  which  had  $7,000,000  of  common  and  $12,000,000  of  preferred 
stock,  and  a  funded  debt  of  $6,000,000.  This  road  connected  Portland 
with  Roseburg  and  St.  Joseph,  Oregon,  and  was  designed  to  be  extended 
southward  to  a  junction  with  the  Southern  Pacific,  thus  enabling  the  Villard 
system  to  tap  the  traffic  passing  through  the  Golden  Gate. 


304 


THE  NEW  YORK  STOCK  EXCHANGE 


The  Villard  pool 
is  formed  and 
buys  control  of 
the  Northern 
Pacific. 


Frederick  Billings,  the  president  of  the  Northern  Pacific  road,  refused 
to  enter  into  a  proposed  arrangement  for  the  running  of  his  trains  over 
the  line  of  the  Oregon  Railway  &  Navigation  Company.  Mr. 
Villard  saw  that  it  was  to  his  interest  to  get  control  of  the 
Northern  Pacific.  He  induced  his  financial  backers  in  the 
Oregon  property  to  make  up  a  fund  to  obtain  such  control, 
complete  the  Northern  Pacific,  and  construct  the  branches 
which  it  needed  as  feeders,  and,  in  fine,  to  create  a  magnificent  railway 
system  connecting  the  Great  Lakes  with  Puget  Sound  and  tapping  the 
stream  of  traffic  east-bound  from  San  Francisco.  An  association  was  formed 
for  the  purpose,  and  purchased  control  of  the  Northern  Pacific  in  the  spring 
and  summer  of  1881. 

Inasmuch  as  the  charter  of  the  Northern  Pacific  forbade  the  construc¬ 
tion  of  branches,  resort  was  had  to  the  forming  of  a  new  corporation,  the 
Oregon  &  Transcontinental  Company,  organized  on  June  28, 1881,  under  the 
laws  of  Oregon,  with  Villard  as  president.  It  started  with  an  authorized 
capital  of  $50,000,000,  with  $30,000,000  subscribed  for,  and  acquired 
the  control  of  the  Oregon  Railway  &  Navigation  Company  and  of  the 
Northern  Pacific,  together  with  the  telegraph  lines  running  along  these 
routes.  On  August  25,  1881,  Mr.  Villard  issued  a  circular,  asking  for 
Northern  Pacific  proxies  and  announcing  that  the  new  holding  company 
had  secured  control  of  both  the  common  and  preferred  stock.  He  declared 
that  the  Oregon  Railway  &  Navigation  Company,  which  his  friends  were 
prepared  to  deliver  to  the  Oregon  &  Transcontinental  Company,  would 
“be  worth  five  million  dollars  gross  annually  to  the  Northern  Pacific”  from 
the  moment  that  the  connection  between  the  two  systems  was  established. 
In  the  following  month  he  was  elected  president  of  the  Northern  Pacific.  He 
was  already  president  of  the  three  Oregon  corporations. 

Having  effected  the  merger,  Mr.  Villard  proceeded  to  extend  the 
Northern  Pacific’s  main  line.  The  Oregon  &  Transcontinental  Company 
began  to  purchase  and  to  build  branch  roads  for  the  Northern  Pacific. 

Each  of  these  branches  was  leased  to  the  Northern  Pacific  for 
Development  of  a  minimum  net  rental  of  $1,400  a  mile,  or  six  per  cent,  on 
$20,000 — the  estimated  cost  of  constructing  a  mile  of  road  — 
with  one  per  cent,  added  to  establish  a  sinking  fund  for  the 
ultimate  redemption  of  the  bonds  issued  to  do  this  work  of  building. 
These  bonds,  bearing  six  per  cent,  interest,  and  running  for  forty  years, 
wrere  to  be  issued  by  the  Oregon  &  Transcontinental  Company.  The 
stock  of  the  branch  roads  was  deposited  in  trust  under  an  arrangement  by 
which  the  Northern  Pacific  exercised  the  rights  of  ownership,  wrhile  paying 
the  rental,  and  would  own  this  branch  road  stock  entirely  upon  the  wiping 
out  of  the  construction  bonds  by  the  operation  of  the  sinking  fund.  The 


an  imposing 
railway  scheme 


AN  ERA  OF  IMPAIRED  CONFIDENCE 


305 


rental  on  each  branch  line  did  not  begin  till  two  years  after  its  acceptance 
by  the  Northern  Pacific.  The  latter  issued  its  own  bonds  to  extend  its 
main  line. 

Charles  F.  Woerishoffer,  E.  D.  Adams,  and  William  Endicott,  Jr.,  were 
among  the  first  directors  of  the  Oregon  &  Transcontinental  Company.  The 
company — which  has  been  well  called  a  blind  pool — never  gave  the  public 
a  satisfactory  idea  of  its  condition.  But  it  succeeded  for  a 
time  in  creating  a  belief  in  its  great  good  fortune.  It  declared  The  Oregon  & 
dividends  of  one  and  one-half  per  cent,  each  m  J anuary,  April,  blind  pool 
and  July,  1883,  while  Mr.  Yillard  and  several  of  his  associates 
were  vigorously  protecting  their  stocks  on  the  Exchange.  The  weakness  in 
the  company’s  assets  was  its  Northern  Pacific  holdings,1  and  this  weakness 
eventually  caused  the  collapse  of  the  bull  campaign.  Jay  Cooke’s  day 
was  too  early  for  the  Northern  Pacific  enterprise,  and  so  was  Henry 
Villard’s.  It  was  a  hopeless  task  to  build  a  profitable  transcontinental 
road  through  the  thinly  populated  country  which  the  Northern  Pacific 
route  was  designed  to  serve.  Mr.  Villard’s  scheme  was  magnificent  on 
paper — calculated  to  stir  the  investor’s  imagination.  But  at  that  period 
it  lacked  the  one  thing  needful  to  financial  success — a  sufficient  body  of 
persons  in  the  stretch  between  Lake  Superior  and  Puget  Sound. 

By  June  30,  1883,  more  than  2,077  miles  of  Northern  Pacific  road  had 
been  built  and  129  additional  miles  were  planned.  The  company  had 
issued  bonds  and  dividend  scrip  to  the  par  value  of  $45,000,000.  Its 
share  total  was  still  about  $90,000,000.  Late  in  June  Mr.  Villard  and 
his  colleagues  had  pushed  the  price  of  Northern  Pacific  common  to  52, 
that  of  the  preferred  to  90,  that  of  Oregon  Railway  &  Navigation  to  150, 
and  Oregon  &  Transcontinental  to  86.  These  figures  marked  the  top¬ 
most  level  reached  by  the  speculative  movement  of  the  Villard  party.  They 
were  far  too  high,  and  the  fact  was  presently  to  be  made  plain. 


HHE  year  1883,  taken  as  a  whole,  was  one  in  which  slackening  trade, 

:  particularly  in  those  very  important  branches,  iron  and  textile 
fabrics,  strongly  tended  to  depress  the  prices  of  securities.  Crops 
were  rather  poor.  Stock  market  events  in  the  first  part  of  the  year  were 
not  over-sensational.  There  were  several  centres  of  speculation— none  of 
great  importance.  The  Wabash  road  was  leased  to  the  Iron  Mountain  in 


lThe  statement  of  the  Oregon  &  Transcontinental  Company  on  June  30,  1883,  showed  that  it 
owned  151,300  shares  of  Northern  Pacific  common  and  162,792  shares  of  Northern  Pacific  preferred,  or 
almost  34  per  cent,  of  the  property,  and  128,535  shares  of  Oregon  Railway  &  Navigation  stock,  of  which 
240,000  shares  were  outstanding.  These  three  classes  of  investments  were  estimated  at  an  aggregate 
value  of  $41,000,000,  allowing  for  some  instalments  still  due.  The  Oregon  &  Transcontinental  Company 
stock  had  now  increased  to  $40,000,000,  and  the  property  carried  a  bonded  debt  of  $7,215,000.  How 
weak  the  Northern  Pacific  was  one  may  understand  by  a  study  of  its  income  account.  The  road  earned  in 
1883  a  balance  applicable  to  stock  dividends  of  only  $1,149,583. 


306 


THE  NEW  YORK  STOCK  EXCHANGE 


April.  In  the  month  following  the  New  Jersey  Central  emerged  from  a 
receiver’s  hands  and  was  leased  to  the  Reading  road — itself  a  recent 
graduate  from  the  bankruptcy  school — for  999  years,  at  a  rental  of  six 
per  cent.,  on  a  share  capital  of  about  $18,500,000.  On  June  16th  a 
panic  in  lard  at  Chicago  ended  the  attempt  of  McGeoch,  Everingham  & 
Co.  to  corner  that  staple,  and  forced  this  house  and  half  a  dozen  others 
to  suspend.  This  mishap  created  some  excitement  in  the  Produce  and 
Stock  Exchanges  here.  But  the  securities  market  was  decidedly  bullish  in 
the  latter  part  of  the  month,  the  crop  reports  being  good.  The  event  did 
not  justify  the  favorable  rumors  of  June.  The  disappointing  fashion  in 
which  the  crops  turned  out  was  an  important  factor  in  the  stock  market. 

In  July  there  occurred  a  serious  strike  of  the  telegraph  operators.  Mr. 
Gould’s  Western  Union  Company  (which  now  owned  a  majority  of  the 
International  Ocean  Telegraph  Company — the  cable  con- 
The  telegraph  cern — and  about  half  of  the  Gold  and  Stock  Telegraph  Com- 
8tnket0rS  party)  was  the  chief  target  of  attack.  Some  15,000  operators 
made  demands,  which  were  refused,  and  quitted  work  on  July 
19th.  For  a  considerable  time  the  business  of  the  country  was  hampered 
by  lack  of  wire  communication  and  there  "was  serious  interference  with 
the  transmission  of  market  quotations.  Western  Union  stock  hung  steadily 
around  80  till  the  middle  of  August,  when  the  forced  reduction  in  earnings 
caused  it  to  drop  about  eight  points.  On  August  18th  the  operators 
renounced  their  union  and  returned  to  work.  On  September  1st  the 
Western  Union  Company  issued  a  statement  virtually  granting  all  the 
demands  for  which  their  employes  had  contended  seemingly  in  vain. 


EAKNESS  in  the  Villard  properties  became  apparent  in  July  and 
grew  more  pronounced.  By  August  11th,  Oregon  &  Transcon¬ 
tinental  had  fallen  to  67%  and  Northern  Pacific  common  to  42%, 
under  the  attack  of  a  powerful  and  intrepid  foe.  The  enemy  was  Mr. 
W oerishoffer,  who  had  left  the  Oregon  &  Transcontinental  directorate  after 
a  sharp  verbal  encounter  with  Mr.  Yillard,  who  accused  him  of  selling  the 
stock  short. 

Charles  F.  Woerishoffer  was  the  most  brilliant  bear  operator  ever 
known  in  Wall  Street.  Furthermore,  judged  simply  as  a  speculator,  he  was 
in  the  first  rank  of  all  who  have  ever  contended  for  speculative  laurels.  He 
began  at  the  ladder’s  foot  and  made  his  way  upward  by  the 

Woerishoffer.  p  -»  •  <  •  ci  i  -i  •  •  •  i  • 

use  of  such  a  combination  of  shrewd  judgment,  daring  mitia- 
tive,  and  pluck,  as  the  elect  alone  possess.  His  triumphs  were  the  fruits 
of  skill,  knowledge,  and  indomitable  courage,  and  in  openhanded  generosity 
the  Street  has  rarely  seen  his  peer.  Naturally  a  keen  operator,  he  perhaps 


AN  ERA  OF  IMPAIRED  CONFIDENCE 


307 


contributed  little  to  the  advancement  of  commercial  progress.  Yet  his 
character  compels  admiration  and  has  never  lacked  it.1  The  quality  of 
consummate  gayety  in  the  face  of  peril — the  very  bloom  of  the  flower  of 
courage,  which  Rostand  calls  “Le  Panache” — was  inherent  in  Woeris- 
hoffer’s  nature.  He  could  have  marched  upon  a  cannon’s  mouth  with  a 
jest  on  his  lips. 

Woerishoffer  was  a  native  of  Germany,  and  came  to  this  country  in 
1865  at  the  age  of  twenty-two.  His  capital  consisted  of  his  brains  and 
of  the  fruits  of  some  previous  training  in  a  German  brokerage  office.  He 

became  a  clerk  for  August  Rutten,  and  later 
started  in  business  for  himself.  Henry  Budge, 
of  Budge,  Schuetze  &  Co.,  bought  him  a  seat 
on  the  Stock  Exchange.  The  young  broker 
formed  a  valuable  connection  with  L.  Yon 
Hoffman  &  Co.  and  other  bankers,  and  his 
affairs  prospered.  In  1876  he  formed  the 
banking  firm  of  Woerishoffer  &  Co.  His  house 
participated  in  various  syndicate  arrange¬ 
ments  and  brought  the  Denver  &  Rio  Grande 
Railroad  upon  the  market.  This 
particular  enterprise  was  unfor-  Grande* 
tunate  for  him  and  for  those  who  promotion, 
purchased  the  shares.  The  stock 
sold  at  113%  in  June,  1881,  and  at  4%  in  June, 
1885.  But  most  of  Woerishoffer’ s  adventures 
were  successful  in  the  extreme.  His  fortune 
had  been  swelled  by  his  marriage,  in  1873,  to 
Miss  Annie  Uhl,  a  stepdaughter  of  Oswald 
Ottendorfer,  owner  of  the  Staats-Zeitung.  He  multiplied  the  dowry  she 
brought  him.  Though  usually  accounted  a  bear,  he  made  large  profits  on 
each  side  of  the  market,  following  its  turns  as  a  successful  operator  must. 
In  the  flush  times  succeeding  specie  resumption  he  was  a  heavy  buyer,  but 
turned  bear  after  the  shooting  of  Garfield. 

Woerishoffer  had  examined  the  field  and  concluded  that  the  Villard 
properties  were  selling  at  grossly  inflated  prices.  He  began  an  attack  upon 


CHARLES  F.  WOERISHOFFER. 


1  One  incident  will  serve  to  illustrate  the  fashion  in  which  Woerishoffer  faced  emergencies.  When 
Messrs.  Gould  and  Sage,  in  pursuance  of  their  Union  Pacific  merger  plan  (described  in  the  preceding 
chapter),  determined  to  release  30,000  Denver  Pacific  shares  from  the  lien  of  a  mortgage  given  by  the 
owner,  the  Kansas  Pacific  Kailroad,  they  found  it  necessary  to  hold  a  majority  of  the  Kansas  Pacific 
bonds  secured  by  that  mortgage,  in  order  to  have  a  standing  in  court.  Woerishoffer  represented  large 
foreign  holders  of  these  bonds,  and  Gould  and  Sage  offered  him  eighty  cents  on  the  dollar  for  the  paper 
owned  by  his  clients.  The  offer  having  been  accepted,  the  promoters  shortly  afterward  announced  that  a 
consideration  of  the  Kansas  Pacific  roadbed  had  convinced  them  that  the  bonds  were  only  worth  70, 
and  that  they  would  pay  no  more.  Woerishoffer  promptly  cabled  abroad  for  the  bonds,  deposited  them 
with  a  New  York  trust  company,  and  informed  Messrs.  Gould  and  Sage  that  they  would  either  pay  par 
for  the  bonds  or  do  without  them.  The  bonds  were  accordingly  sold  for  par. 


308 


THE  NEW  YORK  STOCK  EXCHANGE 


Mr.  Woerishoffer 
attacks  the 
Villard  party 
with  success. 


them  which  proved  the  greatest  campaign  of  his  career.  Addison  Cammack, 
also  a  noted  bear  and  the  leader  of  the  “Twenty-third  Street  party” 
(which  included  William  R.  Travers,  “Ben”  Carver,  George  Osgood,  and 
others,  and  operated  from  an  uptown  office),  followed  Woerishoffer  in  this 
conflict  as  in  many  others.  Cammack  was  an  extremely  capable  specu¬ 
lator  and  deft  in  turning  his  position,  but  could  not  compare  with  Woeris¬ 
hoffer  in  point  of  judgment,  daring,  or  persistence. 

The  Villard  clique  of  bulls  had  subscribed  a  large  fund  for  the  purchase 
of  100,000  shares  of  Northern  Pacific.  Their  financial  resources  were 
formidable.  For  Woerishoffer  to  start  an  open  attack  upon  them  wras 
regarded  as  inviting  ruin.  In  the  summer  of  1883  the  great  bear  came 
daily  to  his  office  from  his  country  home  at  Long  Branch  to  encounter  the 
doleful  greetings  of  friends,  who  warned  him  of  impending  bankruptcy. 
He  would  sit  for  hours  on  a  lounge,  fighting  the  heat  with  a  palm  leaf  fan, 
fighting  prophecies  of  ill  with  jests  and  quips,  and  fighting  the  bulls  by 
the  issuance  of  orders  which  seemed  evidence  of  dementia.  He 
hurled  Northern  Pacific  and  Oregon  &  Transcontinental  stock 
upon  the  market  in  blocks  of  thousands  of  shares,  feeding  the 
bulls  till  their  appetites  were  glutted.  Values  fell  beneath  the 
load,  yet  his  friends  feared  that  any  day  he  might  find  himself  entrapped 
in  a  corner,  so  one-sided  did  the  contest  seem.  But  the  strength  of  Woeris- 
hoffer’s  position  lay  in  the  fact  that  his  estimate  of  the  intrinsic  merits  of 
the  stocks  was  correct.  His  attacks  provoked  apprehension  in  the  minds 
of  holders  of  these  shares.  He  was  risking  his  whole  fortune,  to  be  sure, 
but  he  had  thoroughly  reconnoitred  the  ground.  Whenever  he  tossed  his 
brokers  an  order  to  “sell  twenty  thousand  more”  the  action  meant  that 
the  bulls  must  take  on  twenty  thousand  additional  shares  of  Northern 
Pacific  at  exorbitant  prices,  or  see  values  sink.  At  length  their  pool  had 
run  dry,  and  the  inducement  to  refill  it  was  small.  The  bull  movement 
began  to  slacken. 

On  September  22,  1883,  the  sales  of  stock  on  ’Change  aggregated 
526,827  shares.  Of  this  amount  Oregon  &  Transcontinental  (which  fell 
to  54)  accounted  for  98,670  shares,  Northern  Pacific  common  (which 
touched  34%)  for  108,700  shares,  and  Northern  Pacific  preferred  (beaten 
down  to  64%)  for  42,485  shares.  The  Oregon  &  Transcontinental  Com¬ 
pany  declared  the  usual  dividend  that  day,  but  it  is  doubtful  that  this 
dividend  was  ever  actually  paid.  On  December  17th,  after  three  months 
more  of  a  losing  battle,  the  Oregon  &  Transcontinental  directors  passed 
the  dividend,  and  it  was  announced  that  Mr.  Villard  would  retire  from  the 
presidency.  The  stock,  which  had  sunk  to  32%  that  day,  closed  at  39%,  the 
trading  amounting  to  406,290  shares.  Northern  Pacific  common  sold  at 
23%  and  the  preferred  at  50.  The  whole  market  was  shaky  this  month,  its 


AN  ERA  OF  IMPAIRED  CONFIDENCE 


309 


weakness  being  augmented  by  the  breaking  up  of  the  Iowa  grain  rate  pool. 
On  December  28th  Oregon  Railway  &  Navigation  fell  to  90,  and  three  days 
later  Oregon  &  Transcontinental  sold  at  29%,  about  one-third  of  the  price 
it  commanded  in  June. 

Mr.  Yillard’s  retirement  had  been  forced  by  an  investigation  of  Oregon 
&  Transcontinental  affairs,  on  the  part  of  a  committee.  It  was  now 
discovered  that  he  was  ruined.  He  had  invested  a  great  deal  of  money  for 
his  friends  in  his  properties,  and  had  fought  hard  to  carry  the  enterprises 
to  success,  even  adopting  such  unusual  means  as  the  giving  of  free  excur¬ 
sions  over  the  Northern  Pacific  road  to  emigrants  who  might  possibly 
settle  in  the  territory  it  traversed.  When  the  stocks  began  to  fall  he  was 
foremost  in  coming  to  their  support.  As  a  result  his  wealth  had  melted 
away.  On  January  4,  1884,  he  resigned  the  presidency  of  the 
Northern  Pacific,  and  made  a  deed  of  his  magnificent  home,  Villard  steps 
at  Madison  Avenue  and  Fifty-first  Street,  to  Horace  White  proud  portion, 
and  William  Endicott,  Jr.,  as  trustees,  to  secure  a  personal 
debt  to  the  Oregon  Railway  &  Navigation  Company.  His  health  had  been 
undermined  by  the  labors  and  anxieties  of  the  campaign.  The  Northern 
Pacific  directors,  recollecting  that  he  had  served  the  road  without  compen¬ 
sation,  voted  him  a  salary  of  $10,000  a  year  for  the  time  he  had  held  the 
office,  and  appointed  J.  Pierpont  Morgan,  August  Belmont,  and  others 
a  committee  to  decide  on  future  action. 

Sitting  in  the  ruin  of  his  cherished  plans,  Mr.  Villard  still  retained  his 
faith  in  their  soundness.  “I  am  consoled,”  he  declared,  “by  an  abiding 
confidence  that  the  future  will  completely  vindicate  all  I  have  done.” 


The  first"  Young 
Napoleon  of 
Finance.” 


SSpfgHE  year  1884  was  a  year  of  panic,  and,  strange  as  it  seems,  the  panic 
s  1  was  the  work  of  one  man.  Had  the  gigantic  swindle  of  Ferdinand 
Ward  come  to  exposure  at  a  period  of  large  general  inflation,  it 
doubtless  would  have  wrought  an  even  more  wretched  and  lasting 
depression.  But  prices  had  been  declining  for  months  in 
advance  of  the  Grant  &  Ward  failure  and  values  were  less 
vulnerable  than  ordinarily.  Mr.  Ward,  who  brought  the  panic 
about,  deserves  attention.  He  was  known  as  the  “Young 
Napoleon  of  Finance.”  The  title  indicated  a  certain  capacity  for  leadership 
which  cannot  be  denied,  though  it  was  undoubtedly  pernicious  in  effect. 

In  more  recent  times,  a  youth  named  Miller  opened  an  office  in 
Brooklyn,  and  advertised  the  fact  that  he  stood  ready  to  pay  ten  per  cent, 
a  week  for  money  to  any  one  who  would  furnish  it.  So  large  a  return,  it  was 
explained,  could  be  paid  because  the  money  was  used  to  enormous  advan¬ 
tage  in  Wall  Street.  Hundreds  of  persons  in  humble  stations  carried  their 


310 


THE  NEW  YORK  STOCK  EXCHANGE 


savings  to  his  counters,  and  all  received  ten  per  cent,  a  week  on  their 
“investments.”  His  dupes  multiplied  so  rapidly  that  the  enterprise  was  a 
flourishing  success.  Suddenly  the  authorities  discovered  and  exposed  his 
.  scheme.  It  came  abruptly  to  an  end  after  fleecing  the  poor 
enterprise  and  out  of  many  thousands.  The  public  learned  that  Miller  had 
that  of  the  followed  the  simple  method  of  paying  “  dividends  ”  out  of  each 

Miller  Syndicate.  recejpts  to  those  who  had  “  invested  ”  on  previous  days. 

Wise  men  wondered  at  the  poor,  ignorant  fools  who  could  be  caught  in  so 
plain  a  snare.  Yet  a  momentary  consideration  should  have  brought  to 
mind  the  fact  that  this  was  but  a  variation  upon  Mr.  Ward’s  device.  For 
Ward  was  Miller’s  prototype,  and  the  financiers  who  “invested”  in  the 
former’s  visionary  schemes  were  the  prototypes  of  Miller’s  dupes. 

Ferdinand  Ward  was  the  son  of  a  clergyman,  and  a  native  of  New  York 
State.  He  was  employed  by  the  Produce  Exchange,  as  assistant  superin¬ 
tendent,  at  a  yearly  salary  of  $1,800,  when  he  made  the  acquaintance  of 
James  D.  Fish,  president  of  the  Marine  National  Bank,  which  was  domiciled 
at  Wall  and  Pearl  streets.  Mr.  Fish  was  not  far  short  of  seventy  years  of 
age.  His  business  record  was  excellent  and  his  bank  enjoyed  public  confi¬ 
dence.  He  no  sooner  met  Mr.  Ward  than  he  succumbed  to  the  influence 
of  a  curious  personal  magnetism  which  Ward  seemed  to  exercise  at  will. 
They  jointly  speculated  in  Produce  Exchange  membership  certificates,  Fish 
presumably  supplying  the  money  and  Ward  effecting  the  trades.  This 
venture  was  successful.  Ward  soon  afterward  resigned  his  position,  took 
desk  room  in  a  brokerage  office,  and  joined  with  Fish  in  stock  dealing. 
By  1880,  when  in  his  twenty-ninth  year,  he  had  gathered  a  tidy  fortune. 
It  was  at  this  time  that  he  met  Ulysses  S.  Grant,  Jr. — familiarly  known  as 
“Buck”  Grant — a  son  of  General  Grant  and  a  man  of  about  Ward’s 
own  age.  The  circumstance  entailed  the  financial  ruin  of  the  Grant  family. 

Ward  instantly  recognized  the  commercial  value  of  the  name  of  Grant, 
and  prepared  to  use  it.  The  firm  of  Grant  &  Ward  was  formed  on  July  1, 
1880,  to  do  a  stock  brokerage  business,  with  a  capital  of 
Formation  of  $300,000,  of  which  Messrs.  Grant,  Ward,  and  Fish  each  con- 
Grant&  Ward,  tributed  a  third.  Mr.  Fish  was  a  special  partner.  General 
Grant  added  $50,000  to  the  firm’s  capital  later  in  the  year, 
also  becoming  a  special  partner.  His  son  Jesse  then  invested  $50,000  with 
the  firm,  half  of  which  represented  the  interest  of  Mrs.  U.  S.  Grant,  Sr.  The 
entire  Grant  family  was  already  prepared  to  follow  Ward’s  rising  star. 

William  C.  Smith,  a  member  of  the  Stock  Exchange,  entered  the  firm  of 
Grant  &  Ward,  which  took  offices  in  the  United  Bank  Building,  at  the  north 
corner  of  Wall  Street  and  Broadway.  For  a  time  the  new  house,  favored 
by  the  magic  name  of  Grant  and  directed  by  the  magic  touch  of  Ward,  did 
a  legitimate  and  most  flourishing  brokerage  business.  Then  it  began  to 


AN  ERA  OF  IMPAIRED  CONFIDENCE 


311 


branch  into  other  things.  A  few  speculative  ventures  went  wrong.  A  little 
“ flyer”  in  West  Shore  bonds  and  stock  and  a  purchase  of  Southern  mining 
shares  cut  great  slices  from  the  profits  made  in  the  less  dashing  but  more 
stable  pursuit  of  one-eighth  per  cent,  commissions.  Mr.  Ward  decided  to 
recoup  the  losses  by  a  plan  of  his  own  invention. 


|0  comprehend  thoroughly  the  working  out  of  Ward’s  stupendous 
swindle,  we  must  bear  clearly  in  mind  the  fact  that  his  partners 
were  in  his  hands.  Mr.  Fish,  to  begin  with,  was  his  dupe,  the  softest 
of  clay  in  the  hands  of  a  most  skilful  potter.  Fish  was  ultimately  forced 
into  prison  garb  for  misapplying  the  funds  of  his  bank.  True.  The  law 
holds  sane  men  responsible  for  their  acts,  brushing  aside  questions  of 
personal  magnetism.  But  to  believe  that  a  man  of  Fish’s  years  and  honest 
name  would  enter  open-eyed  upon  a  scheme  which  was  sure  JamesD  Figh 
to  wreck  his  bank,  and  not  only  ruin  himself  but  his  relatives,  and  General 
is  preposterous.  General  Grant’s  position  was  entirely  differ-  Grant  in  Ward’s 

blends 

ent  from  that  of  Fish.  The  veteran  warrior  was  never  a  man 
of  thorough  business  experience.  He  trusted  in  his  son,  Ulysses.  If  this 
was  weakness,  surely  it  was  a  weakness  to  be  pardoned.  Ulysses  was  in 
business  and  doing  extremely  well,  thanks  to  a  brilliant  partner.  What 
more  natural  than  that  the  father  should  invest  his  own  means  in  the 
firm,  content  to  leave  his  interests  in  the  hands  of  his  son  and  never  caring 
to  inspect  the  books  while  the  returns  were  satisfactory  and  the  whole 
financial  world  seemed  to  approve  of  Ferdinand  Ward?  This  is  precisely 
what  General  Grant  did.  That  he  made  a  mistake  argues  neither  a  blind 
trust  in  Ward  nor  an  unexampled  lack  of  prudence.  All  things  considered, 
he  was  a  victim  of  fate.  As  for  his  son,  Ulysses,  the  young  man  simply 
lacked  the  experience  and  acumen  to  justify  the  father’s  trust.  He  left  the 
entire  business  in  the  hands  of  Mr.  Ward,  who  was  empowered  to  sign  all 
the  firm’s  checks  and  carry  out  all  the  firm’s  transactions.  That  Ward 
should  have  obtained  such  power  is  a  striking  evidence  of  his  adroitness. 
It  is  not  unlikely  that  when  he  established  his  brokerage  house  he  fully 
intended  to  conduct  a  business  both  lucrative  and  respectable.  His  sworn 
statement  tells  us  that  when  he  found  it  impossible  to  continue  the  big 
dividends  that  the  firm  had  been  earning  he  resorted  to  borrowing  money 
at  exorbitant  rates  in  order  to  seize  a  possible  chance  of  scoring  a  great 
hit,  and  kept  on  borrowing  as  he  fell  behind,  always  hoping  to  make  up 
lost  ground.  There  is  no  reason  why  this  statement  should  not  be  accepted. 
Men  of  decent  standing  and  connections  do  not  ordinarily  turn  to  roguery 
save  under  the  stress  of  a  severe  temptation. 

Ward’s  method  was  delightfully  simple.  He  took,  from  all  who  would 


312 


THE  NEW  YORK  STOCK  EXCHANGE 


The  Ward 
method. 


lend  it,  money  at  exorbitant  rates,  handing  his  victim  in  each  case  a  receipt 
for  the  amount  of  the  loan  and  a  due  bill  for  the  amount  of  the  prospective 
“profit.”  He  explained  that  he  could  pay  so  high  a  figure  for  capital 
because  he  used  it  in  supplying  the  Government  with  hay,  corn,  oats,  pork, 
and  other  staples,  all  on  extremely  desirable  contracts.  These 
contracts,  he  hinted,  were  obtained  through  the  influence  of 
General  Grant,  but  the  matter  must  be  kept  absolutely  secret, 
as  the  General  might  be  nominated  for  a  third  term  as  President,  and  this 
contract  business  would  prejudice  him  in  the  voters’  eyes.  “So  not  a 
word  about  it,  my  dear  fellow ;  but  please  accept  this  check  for  $160,000  as 
repayment  of  that  loan  of  $100,000,  which  you  made  us  three  months  ago.” 

The  contracts  were  pure  figments  of  the  imagination,  described  by  an 
eloquent  tongue.  Their  records  were  scrawled  upon  the  pages  of  the  firm’s 
books,  the  counterfeits  of  honest  accounts,  and  were  cleverly  deceitful. 
The  swindle  lasted  about  two  years.  As  fast  as  Ward  paid  over  his  exor¬ 
bitant  profits,  his  “customers”  hastened  to  reinvest  the  funds  in  his 
“contracts.”  When  we  recollect  that  General  Grant  had  early  declared 
that  he  and  his  son  would  both  leave  the  firm  if  it  had  any  business  with 
the  Government,  and  that  Ward  had  to  conceal  from  the  Grants  the  nature 
of  the  honey  which  was  entrapping  all  his  flies,  we  perceive  the  quality  of 
the  “  YYmng  Napoleon’s  ”  gifts.  He  was  aided  of  course  by  the  consciousness 
of  his  dupes  that  the  whole  affair  was  a  little  out  of  the  trodden  path  and 
must  not  be  talked  about.  Many  financiers  and  acute  merchants  were 
among  these  “customers.”  They  certainly  must  have  known  that  the  big 
“profits”  paid  by  Mr.  Ward  were  not  honestly  earned. 

For  two  dazzling  years  Ward’s  star  ascended.  His  partners,  even  to 
the  General,  considered  him  a  phenomenon  and  rated  his  judgment  as 
infallible.  Occasionally  young  Ulysses  would  inquire  as  to  the  business 
details,  only  to  get  the  smiling  reply:  “Oh,  now,  Mr.  Grant,  you  ought  to 
be  satisfied  with  your  profits.  I  am  willing  to  do  all  this  work.  If  there  is 
any  loss  upon  these  contracts,  I  stand  ready  to  guarantee  them  for  the 
firm.”  The  guarantee  was  enough.  The  Grants  had  all  their  available 
capital  in  the  business. 1  They  were  getting  rich  by  the  minute.  So  was 
Fish.  So  were  all  their  customers.  Mr.  Ward  was  carrying  the  whole 
burden,  and  fortunately  he,  too,  was  getting  rich.  The  profits  of  the  firm 
between  April  18,  1882,  and  May  1, 1884,  were  alleged  to  be  $2,559,849. 


1  Ulysses  S.  Grant,  Jr.,  threw  his  own  fortune  and  that  of  his  wife  into  Ward’s  trap,  and  borrowed 
$ 500,000  from  his  father-in-law,  ex-Senator  Chaffee,  of  Colorado,  to  throw  in  also.  Some  time  after  the 
crash  he  made  this  statement:  “The  articles  of  agreement  of  the  firm  provided  that  Mr.  Ward  should  draw 
all  the  checks  and  transact  all  the  business.  ...  I  had  the  greatest  confidence  in  him.  .  .  .  When 
he  first  proposed  the  partnership  to  me  I  knew  that  he  was  making  plenty  of  money,  and  I  said,  ‘  Oh, 
you  don’t  want  to  attach  yourself  to  a  slow  coach  like  me.’  .  .  .  Up  to  the  time  of  the  failure  I 
believed  that  I  was  worth  $1,700,000.  .  .  .  No  one  in  our  family  had  an  idea  that  the  firm  had  over¬ 
drawn  its  account.”  Mr.  Grant  said  that  he  and  his  brother  drew  merely  their  bare  living  expenses  out 
of  the  firm,  because  they  thought  it  was  making  heavy  profits. 


AN  ERA  OF  IMPAIRED  CONFIDENCE 


313 


Mr.  Ward’s  game  could  not  last  forever.  It  was  terminated  by  the 
demand  upon  him  for  cash  made  in  the  spring  of  1884.  He  had  loaned  out 
large  sums  on  collateral  and  had  afterward  resorted  to  rehypothecating 
the  securities.  He  had  raised  money  by  discounting  the  firm’s  notes,  pay¬ 
ing  sometimes  as  high  a  figure  as  thirty  per  cent,  “to  persons  whom  Grant 
&  Ward  desired  to  oblige.”  He  had  built  up  a  pile  of  liabilities  which  in  his 
wildest  dreams  he  could  not  hope  to  level.  In  the  early  part  of  1884  the 
bears  ruled  the  stock  market.  As  prices  fell,  wiping  out  his  own  chances 
for  legitimate  profit,  and  inducing  individuals  to  demand  back  their  invest¬ 
ments  because  they  needed  money,  the  “Young  Napoleon”  perceived  at  a 
distance  the  end  of  his  career.  He  was  a  member  of  the  Marine  Bank 
directorate,  and  had  induced  Fish  to  lend  him  a  large  portion  of  the 
bank’s  funds.  Undoubtedly  he  must  have  known  that  his  failure  would 
drag  down  that  institution  also. 

The  events  preceding  and  accompanying  the  Grant  &  Ward  collapse 
must  be  briefly  narrated.  January  was  notable  not  only  for  the  Villard 
failure  but  for  a  drop  in  the  bonds  of  the  New  York,  West  Shore  &  Buffalo 
Railway,  of  which  General  Edward  F.  Winslow  was  president 
and  whose  directorate  included  General  Horace  Porter, 

Charles  F.  Woerishoffer,  George  M.  Pullman,  Frederick  of  the  road  drop 
Billings,  H.  V.  Newcomb,  and  others,  and  had  included  Mr.  eharp1^  “  Jan‘ 
Villard.  This  road  was  built  to  parallel  the  New  York 
Central  from  New  York  City  to  Buffalo.1  It  had  capital  stock  to  the  par 
value  of  $40,000,000,  and  had  issued  $50,000,000  of  five  per  cent,  fifty- 
year  bonds,  wdiich  Winslow,  Lanier  &  Co.  sold  in  1883  at  between  78% 
and  82.  These  bonds  were  listed  on  ’Change  and  soon  began  to  sink.  On 
January  1, 1884,  the  first  through  train  to  Buffalo  ran  over  the  road.  In 
the  same  month  the  property  defaulted  on  its  bond  interest.  The  price  of 
the  bonds  fell  from  65%  on  January  7th  to  57%  on  January  12th.  The 
failure  of  McGinnis  Bros.,  Fearing  &  Co.,  was  hastened  by  this  drop.2  In 
June  the  West  Shore  went  into  a  receiver’s  hands,  but  for  a  year  longer  it 
remained  a  thorn  in  Vanderbilt’s  flesh. 

1  William  H.  Vanderbilt  in  an  interview  in  the  Tribune,  printed  in  August,  1884,  declared  that  the 
“  West  Shore  was  built  as  a  blackmailing  scheme,  just  as  the  Nickel  Plate  was.”  The  New  York,  West 
Shore  &  Buffalo  Railway  had  been  organized  in  February,  1880,  to  build  a  road  from  New  York  to 
Buffalo  by  way  of  Utica  and  Syracuse,  with  branches  to  Albany  and  Rochester.  In  June,  1881,  the 
company  absorbed  the  North  River  Railway  Company,  which  owned  a  line  from  Weehawken,  N.  J. 
(opposite  New  York  City),  to  Fort  Montgomery,  N.  Y.,  and  was  to  extend  this  line  northward  to  Albany, 
with  a  branch  running  from  Cornwall-on-the-Hudson  west  to  Middletown.  The  New  York,  Ontario  & 
Western  road  (which  ran  from  Middletown  to  Oswego,  about  250  miles)  took  a  contract  to  complete  the 
West  Shore  line  from  Weehawken,  via  Cornwall,  to  Middletown,  for  $10,000,000  of  West  Shore  bonds  and 
$2,367,000  of  the  stock.  The  section  from  Cornwall  north  to  Albany  and  thence  west  to  Buffalo  was  built 
by  the  North  River  Construction  Company  as  contractor.  This  concern  was  paid  in  West  Shore  bonds 
and  went  bankrupt  early  in  1884.  The  New  York,  Ontario  &  Western  took  a  lease  of  the  section  which 
it  built,  subject  to  the  West  Shore’s  right  to  use  the  tracks  from  Cornwall  south  to  Weehawken.  The 
same  interests  dominated  all  these  corporations.  The  West  Shore  was  built  with  extravagance.  It 
earned  a  deficit  in  the  year  ending  September  30, 1884,  of  about  $685,000. 

2  This  firm  was  closely  associated  with  the  Villard  party  and  had  already  been  severely  hurt  by  the  fall 
in  the  Villard  securities. 


314 


THE  NEW  YORK  STOCK  EXCHANGE 


The  Lacka¬ 
wanna  squeeze, 


Late  in  February  there  was  heavy  dealing  in  Delaware,  Lackawanna 
&  Western,  and  in  the  following  month  there  were  two  large  coffee  trade 
failures  and  a  little  “squeeze”  in  Lackawanna,  which  S.  Y.  White  was 
manipulating,  and  another  of  about  ten  points  in  Central,  which  rose  to 
128%  on  short  covering.  Mr.  White’s  corner  produced  spec¬ 
tacular  events  on  March  1st,  Lackawanna  stock  selling  at 
the  same  time  for  130  regular  and  139%  cash.  Russell  Sage 
was  caught,  1,500  shares  being  bought  in  for  him  under  the  rule.  General 
C.  H.  T.  Collis  brought  several  thousand  shares  of  Lackawanna  by  special 
train  from  Philadelphia  to  this  city,  to  take  advantage  of  the  premium 
offered  in  the  loan  crowd. 

The  cutting  of  rates  by  Commissioner  Fink  caused  weakness  in  the 
northwestern  railways.  The  general  stock  list  kept  sagging.  On  April 
30th  James  R.  Keene,  who  had  been  vainly  attempting  to  rival  Russell  Sage 
in  the  put  and  call  market,  announced  his  suspension.  “After  paying  out 
millions  of  dollars  in  cash  in  the  last  few  months,”  said  he,  “in  my  efforts 
to  protect  my  privileges  in  a  falling  market,  I  have  finally 
jamesDR°Keene  determined  to-day  to  call  a  halt  in  the  interests  of  those 
with  whom  I  have  business.”  Mr.  Keene  had  passed  an  early 
crest  of  prosperity  in  the  spring  of  1879,  when  an  attempt  to  corner  the 
wheat  market  cost  him  a  fortune.  In  the  summer  of  1883  he  made  large 
profits  in  oil,  in  connection  with  the  Tidewater  Pipe  Line  Company,  but  had 
lost  heavily  in  the  Villard  stocks  and  Jersey  Central.  His  suspension 
resulted  from  dealing  in  privileges  on  a  large  scale,  a  pursuit  which  he 
does  not  seem  to  have  fully  mastered.  He  issued  puts  lavishly  at  prices 
cheaper  than  those  charged  by  Mr.  Sage,  and  failed  to  protect  himself  by 
short  sales.  We  may  instance  his  sale  at  35  of  puts  on  Oregon  &  Trans¬ 
continental,  good  for  a  year,  made  when  the  stock  was  selling  at  85.  On 
the  day  of  his  failure  it  touched  16%,  less  than  half  of  the  price  at  which 
he  had  agreed  to  take  it. 

Mr.  Keene  was  able  to  effect  an  arrangement  with  his  creditors,  by 
giving  them  notes  for  his  debts.  A  few  weeks  later  he  resumed  business. 
His  subsequent  career  has  been  one  of  extraordinary  success. 


HT  eleven  o’clock  on  the  morning  of  Tuesday,  May  6th,  the  Marine 
National  Bank  suddenly  closed  its  doors,  and  the  sidewalks  sur¬ 
rounding  it  were  thronged  with  a  quickly  gathering  crowd  of 
depositors  who  could  scarcely  believe  their  senses.  A  few  minutes  later  the 
firm  of  Grant  &  Ward  notified  the  Stock  Exchange  of  its  inability  to  keep 
its  contracts,  and  something  less  than  2,000  shares  were  sold  under  the 
rule  for  its  account.  That  afternoon  General  Grant  rode  downtown  to  the 


AN  ERA  OF  IMPAIRED  CONFIDENCE 


315 


office  where  he  believed  that  he  and  his  family  were  making  a  fortune.  As 
he  passed  through  Grant  &  Ward’s  doors  his  eye  fell  on  his  son  Ulysses. 
“Father,”  said  the  young  man,  “everything  is  burst,  and  we  The Marine Bank 
can’t  get  a  cent  out  of  the  concern.”  It  was  General  Grant’s  and  Grant  & 
first  intimation  that  his  firm  was  in  the  slightest  trouble.  The  Ward  fail  on  the 
Marine  Bank  had  lent  to  Grant  &  Ward,  all  told,  $4,144,000 —  eame  mornmg- 
most  of  it  on  the  firm’s  unprotected  notes — and  the  borrowers  still  owed 
the  institution  enough  to  wreck  it,  for  Grant  &  Ward’s  assets,  like  their 
contracts,  were  chiefly  visionary. 1  The  bank’s  failure  had  been  so  sudden 
as  to  surprise  most  of  the  directors.  Its  underlying  cause  was  the  action 
of  President  Fish  in  advancing  bank  funds  to  Grant  &  Ward.  It  was 
directly  precipitated,  however,  by  Ward,  who,  in  his  capacity  as  director, 
accepted  on  deposit  his  own  fraudulent  checks  on  the  First  National  Bank 
and  issued  a  Marine  Bank  certified  check  against  this  deposit,  in  favor  of 
William  Strong  Warner.  By  reason  of  the  system  then  prevailing,  this 
fraudulent  check,  calling  for  $81,000,  had  to  be  paid  by  the  First  National 
Bank  when  presented  at  the  Clearing  House.  The  officers  of  that  institu¬ 
tion,  on  learning  that  they  had  been  cheated,  hastened  to  demand  an 
explanation  of  the  Marine  Bank  and  found  its  doors  closed.  Warner,2 
who  profited  by  this  check,  and  was  eventually  indicted  for  the  transaction, 
was  probably  an  accomplice  of  Ward.  He  represented  J.  H.  Work 
(according  to  Ward)  in  all  his  investments  in  the  firm  of  Grant  &  Ward. 
Julien  T.  Davies,  who  became  assignee  and  receiver  for  Grant  &  Ward, 
was  a  former  partner  of  Mr.  Work. 

The  failure  of  the  bank  and  the  end  of  Ward’s  career  not  only  depressed 
stock  prices  one  to  three  per  cent,  at  the  time  but  led  the  way  for  a  series 
of  bankruptcies  and  losses  which  constitute  the  “Grant  &  Ward  panic”  in 
the  history  of  the  Street.  The  immediate  effects  were  pathetic.  General 
Grant  was  ruined,  save  for  the  trust  fund  which  he  enjoyed  as  a  tribute  of 
his  grateful  fellow  citizens  to  his  public  services.  He  had 
not  only  lost  all  he  put  into  the  firm,  but  on  Sunday,  two 
days  before  the  failure,  had  borrowed  $150,000  from  William 
H.  Vanderbilt  and  turned  it  over  to  Ward,  believing  it  was  to  tide  over  a 
little  temporary  emergency.  After  the  denouement  he  mortgaged  all  of 

1  The  Marine  Bank  had  been  thirty-five  years  in  business.  Its  statement  on  the  Saturday  prior  to  the 
failure  showed:  Capital  stock,  $400,000;  surplus,  $225,000;  deposits,  $5,254,000;  loans,  $4,571,000; 
specie  on  hand,  $1,049,000 ;  circulation,  $266,000;  profit  and  loss,  $50,000. 

The  actual  condition  of  Grant  &  Ward  is  shown  by  the  following  figures  published  by  the  receiver 
on  July  7, 1884:  Nominal  assets,  $27,139,098;  real  assets,  $67,174;  liabilities,  $16,792,647. 


Grant  &  Ward 
panic. 


2  Warner  and  Work  were  jointly  indicted,  but  the  indictments  were  quashed.  Ward  served  about  six 
and  a  half  years  in  prison,  and  Fish  served  about  four  years,  and  then  obtained  a  pardon.  It  has  always 
been  a  matter  of  wonder  that  no  trace  could  be  found  of  the  fortune  absorbed  from  the  public  by  Ward’s 
swindle.  Many  professed  to  explain  the  mystery  by  the  theory  that  Ward  and  Warner  were  in  collusion 
and  divided  the  spoils  among  them.  Ward’s  conveyance  of  his  property  to  Warner,  and  the  fact  that  the 
latter  left  America  to  escape  the  effects  of  a  judgment  for  about  $1,400,000,  rendered  against  him  in  favor 
of  the  creditors  of  Grant  &  Ward,  furnish  the  strongest  circumstantial  evidence  in  support  of  this  theory. 


316 


THE  NEW  YORK  STOCK  EXCHANGE 


his  property —even  the  Philadelphia  dwelling  given  him  by  residents  of  that 
city — to  Mr.  Vanderbilt,  in  partial  payment  of  the  debt.  His  sons,  Jesse 
and  Frederick,  had  “invested  ”  heavily  inWard’s  enterprise,  and  were  forced 
to  make  assignments.  So  was  Ulysses  the  younger,  who  held  worthless 
paper  of  the  firm  to  the  amount  of  $935,000  for  which  he  had  paid 
$780,000,  by  no  means  all  his  own  money.  Mr.  Smith,  the  Board  member  of 
the  firm,  likewise  made  an  individual  assignment.  The  city  had  $1,000,000 
on  deposit  with  the  Marine  Bank — the  directorate  included  J.  Nelson 
Tappan,  the  City  Chamberlain — and  lost  about  a  fifth  of  it.  On  May  13th 
the  bank  went  into  the  hands  of  Walter  S.  Johnston,  as  receiver.  A  short 
while  before  the  suspension  its  stock  sold  at  $160  a  share.  In  the  ulti¬ 
mate  winding  up  of  its  affairs  its  depositors  received  about  eighty  cents  on 
the  dollar. 

Without  tracing  the  court  proceedings  which  grew  out  of  this  swindle, 
we  may  note  the  fact  that  Fish  was  finally  sentenced  to  ten  years  in  prison 
for  misapplying  the  bank’s  funds,  and  Ward  was  punished  with  a  like 
sentence  for  his  fraudulent  check  certification.  The  old  bank  president,  if 
guilty  of  criminal  folly,  was  at  least  the  worst  sufferer  by  its  fruits.  He 
was  doubtless  unfaithful  to  his  trust,  moderating  for  the  sake  of  private 
gain  the  diligence  he  owed  to  his  position.  But  we  may,  without  violating 
the  cause  of  justice,  regard  his  downfall  with  some  feeling  of  pity.  Old, 
broken,  and  stripped  of  his  honor  and  his  goods,  with  the  knowledge  that 
his  own  blood  relations  had  sunk  their  little  wealth  in  the  failure  that 
ruined  him,  he  was  compelled  to  exchange  a  high  place  in  the  world  of 
affairs  for  the  stripes  of  a  convict.  His  own  bitter  contention  that  he  had 
lost  everything  by  trusting  Ward  is  not  unsupported  by  evidence.  Many 
heard  the  ring  of  truth  in  his  words :  “I  may  be  the  most  stupendous  fool 
in  the  country,  but  I  am  not  a  robber.” 

As  for  General  Grant,  he  had  at  least  the  comfort  of  a  clear  conscience, 
the  continued  respect  of  his  fellow  countrymen  and  enough  to  live  on.  But 
the  terrible  overthrow  of  his  hopes  doubtless  hastened  his  end.  He  died  at 
Mount  McGregor,  New  York,  of  cancer  of  the  throat,  on  July  23, 1885,  after 
an  illness  of  nine  months. 

On  May  13th  the  Street  received  another  shock  in  the  news  that  John  C. 
Eno,  president  of  the  Second  National  Bank,  had  robbed  it  of  an  enormous 
sum  (most  of  which  had  been  squandered  in  speculation)  and  had  fled  to 
Canada.  He  was  a  young  man  who  had  filled  this  important 
The  Eno  defai-  post  by  reason  of  the  interest  in  the  bank  held  by  his  father, 
Amos  F.  Eno.  The  father  donated  $3,500,000  to  make  good 
the  bulk  of  his  son’s  peculations,  and  the  directors  raised  $500,000  to 
supply  the  remainder. 

Wednesday,  May  14th,  was  a  day  of  genuine  panic.  Prices,  already 


AN  ERA  OF  IMPAIRED  CONFIDENCE 


317 


The  Seney 
panic. 


tottering  by  virtue  of  the  preceding  week’s  revelations,  suffered  a  fresh 
succession  of  heavy  blows,  and  tumbled  with  a  crash,  closing  near  the  lowest 
levels  reached.1  This  occasion  marked  the  collapse  of  the  Seney  fortunes. 
George  I.  Seney,  who,  it  will  be  recalled,  gave  his  name  to  the  Nickel  Plate 
syndicate,  was  a  notable  figure  in  the  financial  world.  As  president  of  the 
Metropolitan  Bank,  with  its  capital  and  surplus  of  $4,500,000 
and  deposits  of  more  than  $11,000,000,  he  enjoyed  a  position 
of  high  importance  in  the  money  market.  As  a  figure  in  rail¬ 
way  ventures  he  headed  an  active  and  prominent  group  of  operators. 
The  stocks  of  the  Ohio  Central,  Virginia  &  Georgia,  and  other  roads  with 
which  he  was  identified,  were  made  active  under  his  leadership,  and  with 
unfortunate  results  to  the  buyers.  But  his  career  was  one  of  much  success 
for  a  time,  and  he  was  conspicuous  not  only  as  a  financier  but  also  for  his 
liberal  patronage  of  the  fine  arts  and  of  charitable  enterprises.  Mr.  Seney 
was  the  son  of  a  Methodist  clergyman,  and  his  purse  seemed  always  open 
to  the  church  in  whose  faith  he  had  been  reared.  He  gave  $27,000,  for 
instance,  to  Wesleyan  University.  The  Seney  Hospital,  in  Brooklyn,  was 
the  outgrowth  of  his  gift  of  land  worth  about  $40,000,  and  of  $400,000  in 
money. 

The  Metropolitan  Bank  had  been  established  since  1851,  and  occupied 
offices  at  No.  108  Broadway.  Mr.  Seney  had  entered  its  employ  as  a  clerk, 
and  had  become  its  chief  executive  in  1865.  The  credit  of  the  institution 


1  Following  is  a  table  showing  the  range  of  prices  in  most  of  the  active  stocks  in  the  course  of  the 
1884  panic.  The  columns  give,  in  the  order  named,  (a)  high  levels  of  March,  1884 ;  (b)  closing  prices  the 
day  before  the  Grant  &  Ward  failure;  (c)  closing  prices  on  May  6th,  day  of  the  Grant  &  Ward  failure; 
(d)  closing  prices  on  May  13th;  (e)  closing  prices  on  May  14th,  day  of  the  Metropolitan  Bank  failure; 


[a] 

[b] 

[c] 

[d] 

[e] 

[f] 

Stock. 

March, 

Close, 

Close, 

Close, 

Close, 

June, 

1884. 

May  5. 

May  6. 

May  13. 

May  14. 

1884. 

Chicago  &  North-Western, 

.  120% 

112% 

Ill 

107% 

101% 

81% 

Chicago,  Milwaukee  &  St.  Paul, 

93% 

83% 

81% 

73% 

66% 

58% 

Delaware,  Lackawanna  &  Western,  . 

•  133% 

118% 

116% 

112% 

109 

99% 

Louisville  &  Nashville,  . 

51% 

46% 

45% 

40% 

35 

22% 

Missouri  Pacific,  .... 

92% 

82 

79% 

78 

67% 

91% 

New  York  Central,  .... 

122 

113% 

112% 

110 

107% 

94% 

New  Jersey  Central, 

89 

80% 

79 

77 

73% 

54 

New  York,  Lake  Erie  &  Western,  . 

25% 

19% 

17% 

13% 

13% 

11% 

Northern  Pacific,  .... 

22% 

24% 

23% 

21% 

20 

14 

Oregon  Transcontinental, 

22% 

19% 

17% 

15 

12 

6% 

Pacific  Mail, . 

56% 

45% 

44% 

42% 

36 

35% 

Philadelphia  &  Reading,  . 

60% 

42% 

40% 

34% 

33% 

22 

Rock  Island, . 

.  124% 

119 

118 

116 

113% 

100% 

Texas  Pacific, . 

21% 

16% 

15% 

12% 

10% 

11 

Union  Pacific, . 

82% 

60% 

57% 

45% 

41 

28 

Wabash,  St.  Louis  &  Pacific,  . 

16% 

9% 

9 

6 

5% 

4 

Western  Union,  .... 

76 

61% 

59% 

55 

50% 

50% 

The  high  price  given  for  Delaware,  Lackawanna  &  Western  refers  to  regular  sales  only.  Missouri 
Pacific’s  remarkable  recovery  from  the  panic  level  will  be  noticed.  Of  the  stocks  named,  the  following  sold 
later  in  the  year  below  the  June  prices :  D.,  L.  &  W.,  which  touched  86% ;  N.  Y.  Central,  83% ;  N.  J.  Central, 
37%;  Phil.  &  Reading,  16%;  Western  Union,  49. 


318 


THE  NEW  YORK  STOCK  EXCHANGE 


was  extremely  high.  But  in  the  spring  of  1884  the  fact  that  Mr.  Seney 
was  widely  identified  with  speculative  stocks,  and  that  their  prices  were 
constantly  descending,  caused  unpleasant  rumors.  A  feeling  of  dissatis¬ 
faction  with  his  course  had  been  expressed  by  the  directors,  and  the 
president  had  agreed  to  work  out  of  his  railroad  duties  and  devote  his 
entire  time  to  the  bank,  of  which  he  was  reputed  to  own  the  control. 
Naturally  its  fortunes  were  identified  in  the  public  mind  with  his  own. 

Mr.  Seney  was  a  member  of  the  Stock  Exchange  firm  of  Nelson  Robinson 
&  Co.,  headed  by  his  son-in-law,  Mr.  Robinson,  and  also  including  his  sons, 
Robert  Seney  and  George  I.  Seney,  Jr.  About  ten  o’clock  on  the  morning 
of  May  14th,  after  long  fighting  of  a  hostile  market  and  responding  to 
heavy  monetary  drains,  this  firm'  suspended  payment,  owing  a  million  and 
a  half.  The  failure,  following  the  reports  of  Mr.  Seney’ s  ill  fortune,  was 
taken  by  the  Street  as  a  proof  of  his  ruin.  Instantly  a  terrific  run  on  the 
„  .  .  Metropolitan  Bank  ensued.  At  a  quarter  past  eleven  o’clock 

the  Metropolitan  the  institution  closed  its  doors.  The  suspension  of  two  minor 
Bank  and  of  houses  had  already  taken  place,  and  now  the  large  firm  of 
a^e'h o u ses  Hatch  &  Foote,  whose  customers  had  omitted  to  make  their 

follows  the  bank-  margins  good,  announced  its  inability  to  meet  obligations, 
ruptcy  of  Mr.  The  news  created  great  excitement  on  the  Board,  and  the 

Seney  s  firm.  #  0 

Sixth  issue  of  selling  movement  ran  into  a  panic.  The  financial  district’s 
Clearing  House  thoroughfares  were  speedily  thronged.  The  failures  of  various 
brokerage  firms  and  of  the  Atlantic  Bank,1  of  Brooklyn,  came 
in  quick  succession.  Banks  everywhere  were  calling  in  loans,  and  energetic 
measures  were  required.  A  meeting  was  held  at  the  Clearing  House  in  the 
afternoon,  and  the  banks  determined,  for  the  sixth  time  in  their  history, 
to  issue  Clearing  House  certificates.  This  prevented  a  general  bank 
suspension. 2 

At  noon  on  the  following  day  Mr.  Seney  resigned  his  executive  position. 
Henry  L.  Jacques  succeeded  him,  and  the  Metropolitan  Bank,  to  the 
immense  relief  of  the  Street,  resumed  payment.  But  the  shock  sustained 
by  the  Street,  which  had  raised  the  rate  of  money  to  three  and  a  half  per 
cent,  a  day,  and  had  spread  ill  fortune  in  Boston,  Philadelphia,  Baltimore, 
Albany,  Hartford,  Bridgeport,  Pittsburg,  Chicago,  and  Milwaukee,  was  not 
yet  exhausted.  The  stock  of  the  Bankers  and  Merchants’  Telegraph 
Company,  which  had  closed  on  Wednesday  at  119,  fell  on  Thursday,  May 
15th,  to  45.  Anthony  W.  Dimock  had  been  conducting  a  bull  campaign 

1  Mr.  Seney  owned  about  one-quarter  of  the  stock  of  this  institution,  and  had  a  large  amount  of  Met¬ 
ropolitan  Bank  funds  deposited  with  it.  He  was  forced  suddenly  to  withdraw  these  funds,  and  the  Atlantic 
Bank  went  under. 

2  Clearing  House  certificates  to  the  amount  of  $24,915,000,  all  told,  were  issued.  They  bore  six  per 
cent,  interest  and  were  taken  by  twenty  of  the  eighty-two  banks  belonging  to  the  association.  The  last 
of  these  certificates  was  issued  on  June  26,  1884.  They  were  not  all  retired  and  cancelled  until  September 
23,  1886. 


AN  ERA  OF  IMPAIRED  CONFIDENCE 


319 


in  this  issue,  and  his  firm,  A.  W.  Dimock  &  Co.,  failed  with  liabilities  of  more 
than  $3,000,000.  In  the  afternoon  the  firm  of  Fisk  &  Hatch,  composed  of 
Harvey  Fisk  and  Alfred  S.  Hatch,  suspended  payment.  Two  nf  a  w 

days  previous,  Mr.  Hatch  had  been  elected  president  of  the  Dimock  &Co. 
New  York  Stock  Exchange.  Upon  his  firm’s  suspension  he  and  of  Fisk  & 
instantly  resigned  the  office,  his  place  being  taken  by  the  vice-  a  c 
president,  William  Lummis.  The  house  of  Fisk  &  Hatch  was  famous  for  its 
handling  of  Government  bonds.  It  had  also  been  closely  connected  for 
years  with  the  Chesapeake  &  Ohio  Railroad  Company,  of  which  Collis  P. 
Huntington  was  president.  When  Fisk  &  Hatch  failed  for  more  than 
$8,000,000,  in  1873,  it  was  by  reason  of  a  debt  of  $2,651,000  owed  the 
house  by  this  railroad.  The  connection  was  also  credited  with  the  cause 
of  the  second  failure.  It  carried  down  the  Newark  Savings  Institution, 
which,  for  the  sake  of  convenience,  had  kept  a  large  amount  of  securities  on 
deposit  with  Fisk  &  Hatch.  The  firm  never  resumed  business,  but  its 
members  did.  Mr.  Hatch1  was  reinstated  in  the  privileges  of  the  Exchange 
on  June  6th. 

The  veteran  hero  of  the  privilege  market,  Mr.  Russell  Sage,  was  forced 
on  Friday,  May  16th,  to  stand  a  siege  well  calculated  to  rack  the  nerves  of 
a  much  younger  man.  For  months  he  had  been  freely  selling  puts,  and, 
like  unwelcome  chickens,  they  had  come  home  to  roost,  driven  by  the  storm 
which  had  been  sweeping  confusion  through  Wall  Street.  Mr.  Sage’s  obli¬ 
gations  on  the  score  of  his  puts  were  enormous.  When  their  purchasers 
began  to  present  them,  Mr.  Sage  proceeded  to  temporize  with  such  effect 
that  the  holders  hawked  his  privileges  about  the  Street  at  half  their  face 
value.  Mr.  Sage  may  have  reckoned  that  by  delaying  pay¬ 
ment  he  could  profit  in  two  ways,  giving  the  market  time  to 
recuperate  and  to  diminish  the  losses  on  his  puts,  and  influ¬ 
encing  the  holders  to  compromise  their  claims.  The  terms  of  his  privileges 
provided  that  they  should  be  paid  within  twenty-four  hours  after  having 
been  stamped  at  his  office,  No.  71  Broadway.  A  great  crowd  gathered 
there  this  Friday  and  presented  puts — all  bearing  Mr.  Sage’s  promise  to 
purchase  stock  at  prices  far  above  those  then  prevailing  in  the  market. 
He  kept  his  entrance  doors  closed  and  declined  to  stamp  more  than  one 
put  in  ten.  An  incipient  riot  was  checked  only  by  the  arrival  of  a  detach¬ 
ment  of  police  from  the  Liberty  Street  Station.  Acting  President  Lummis 
of  the  Stock  Exchange  visited  Mr.  Sage  and  threatened  him  with  official 
discipline,  without  however  greatly  accelerating  the  redemption  of  Mr. 
Sage’s  puts.  They  were  compromised  at  various  discounts.  When  the 
day’s  siege  was  raised  Mr.  Sage  declared  that  he  had  paid  out  between  six 

*  Collis  P.  Huntington  bought  the  Stock  Exchange  seat  of  Mr.  Hatch’s  son,  John  R.  Hatch,  in  January, 
1885.  The  price  was  understood  to  be  $25,000. 


Mr.  Sage  faces 
an  emergency. 


320 


THE  NEW  YORK  STOCK  EXCHANGE 


and  seven  millions  in  the  last  three  days,  and  was  prepared  to  pay  as 
much  in  the  next  three.  By  May  21st  his  doors  were  open  as  usual.  On 
this  day  Lake  Shore  stock  sold  between  85%  and  83%,  and  Mr.  Woerishoffer 
put  two  thousand  shares  of  Lake  Shore  to  Mr.  Sage  at  95.  The  market 
was  extremely  weak,  and  another  failure — that  of  Brownell  &  Co. — was 
recorded. 

On  the  following  day  the  new  cable  of  the  Commercial  Cable  Company, 
running  from  Yalentia,  Ireland,  was  landed  by  the  steamer  Faraday  at 
Emerson’s  Point,  near  Rockport,  Cape  Ann,  Massachusetts. 
Atianticcabie!^  The  Mackay-Bennett  interests  had  also  strengthened  them¬ 
selves  against  Mr.  Gould  in  another  way,  the  Postal  Tele¬ 
graph  and  Cable  Company  having  taken  advantage  of  the  panic  to  acquire 
control  of  the  Bankers  and  Merchants’  Telegraph  Company. 

On  May  24th  the  West  Side  Bank  suspended  payment,  and  on  June  2d 
the  Philadelphia  &  Reading  Railway  Company  went  for  a  second  time  into 
a  receiver’s  hands  and  the  stock  closed  at  23,  a  loss  of  26%  points.  The 
market  fell  off  somewhat  on  June  6th,  when  the  Republican  party  nomi¬ 
nated  James  G.  Blaine  for  the  Presidency.  On  the  9th  the 
Gould’s  domina-  West  Shore  road  went  into  bankruptcy.  On  the  18th  Charles 
tion  of  the  Francis  Adams,  Jr.,  the  historian  of  Erie,  became  president  of 
road11  Pacific  the  Union  Pacific,  succeeding  Sidney  Dillon.  Boston  interests 
had  supplanted  the  Gould  party  in  the  control  of  the  road. 
However,  Mr.  Gould  remained  master  of  the  Wabash  and  of  the  South¬ 
western  system,  and  their  lines  for  a  time  were  cast  in  no  pleasant 
places.1 

June  24th  witnessed  the  failure  of  Matthew  Morgan’s  Sons,  and  the 
virtual  end  of  the  Grant  &  Ward  panic — the  effect  of  one  young  man’s 
swindling  enterprise  upon  a  market  which  was  already  vulnerable  by 
reason  of  the  inflation  of  railway  securities. 

1  The  Texas  &  Pacific  Railroad,  which  had  earned  $2,355  net  per  mile  in  1880,  earned  only  $527  net 
per  mile  in  1884.  In  June  of  the  latter  year  it  defaulted  on  its  bond  interest  payments,  having  suffered 
severely  by  heavy  Louisiana  floods,  which  closed  its  New  Orleans  division  for  several  months.  Receivers 
took  charge  of  the  property. 

The  Wabash,  St.  Louis  &  Pacific  fell  contemporaneously  into  trouble.  This  road  had  been  leased  on 
April  10, 1883,  to  the  St.  Louis,  Iron  Mountain  &  Southern,  which  was  controlled  by  Mr.  Gould’s  Missouri 
Pacific.  For  a  time  the  Wabash  paid  unearned  dividends,  the  money  being  obtained  on  notes  to  the 
amount  of  more  than  $2,200,000,  indorsed  by  Messrs.  Jay  Gould,  Russell  Sage,  Sidney  Dillon,  and  Solon 
Humphreys.  This  made  possible  a  lucrative  manipulation  of  the  stock.  Suddenly,  in  May,  1884,  the 
Gould  party,  anticipating  a  default  in  bond  interest,  had  their  Wabash  road  clapped  into  receivers’ 
hands— the  receivers  being  Solon  Humphreys  and  Thomas  E.  Tutt— and  directed  their  Iron  Mountain 
road  to  set  aside  the  lease.  The  receivers  issued  certificates  to  protect  the  notes  which  bore  the  Gould 
and  Sage  indorsements.  They  likewise  piled  up  a  debt  of  $7,590,000  in  the  course  of  a  thirty  months’ 
administration.  In  April,  1886,  the  Wabash  was  sold  in  foreclosure,  and  the  road’s  debts  to  Messrs. 
Gould  and  Sage  were  funded  in  prior  lien  bonds.  Judge  Gresham,  in  an  action  brought  in  the  Circuit  Court 
of  Chicago  to  obtain  new  receivers  for  the  Wabash  lines  east  of  the  Mississippi,  removed  Messrs.  Hum¬ 
phreys  and  Tutt  from  office  in  December,  1886. 


XXIII 

FRESH  BATTLES  AMONG  THE  RAILWAYS 

in  the  month  of  July,  1884,  the  market  seemed  to  have 
shaken  off  the  effects  of  the  Grant  &  Ward  panic,  and  some¬ 
thing  of  a  bull  movement  in  stocks  was  stimulating  activity. 
The  price  of  Stock  Exchange  seats,  which  had  shortly  before 
been  at  $20,000,  rose  to  $25,000.  Union  Pacific,  which  had 
changed  hands  at  28  in  June,  was  forced  by  the  heaviest  of 
buying  to  57%  in  August,  but  reacted  to  45%  in  a  few  days. 

On  Monday,  August  11th,  came  a  fresh  shock.  The  Wall  Street  Bank, 
situated  in  the  Mills  Building,  which  had  shown  by  its  last  previous  state¬ 
ment  a  surplus  of  $113,969  on  its  half  million  of  capital,  suspended  pay¬ 
ment  and  posted  a  notice  reading,  “Owing  to  irregularities  on  the  part  of 
its  cashier  this  bank  will  remain  closed  until  the  matter  can  be  investi¬ 
gated.”1  The  institution  had  lost  $100,000  in  bad  loans. 

Twice  that  sum  had  been  taken  by  the  cashier,  Mr.  J ohn  P.  ^rai}^e  of  the 

.  .  ,  .  wall  Street 

Dickinson,  for  use  m  some  ill-advised  speculations,  and  he  was  Bank, 
already  en  route  for  the  Canadian  border.  He  had  complete 
charge  of  the  loans — the  bank  employing  no  loan  clerk — and  had  enjoyed 
the  directors’  entire  confidence.  Mr.  Dickinson  was  an  ardent  church  mem¬ 
ber.  Unfortunately,  he  was  not  under  bonds.  The  Stock  Exchange,  that 
summer,  on  Monday  mornings,  did  not  open  its  doors  until  11  o’clock,  and 
the  failure  was  made  public  some  time  before  that  hour.  When  trading 
began  the  tendency  was  toward  weakness,  but  the  market  rallied  under 
good  support. 

August,  1884,  was  also  notable  for  the  passage  of  the  measure  giving 
Jacob  Sharp’s2  Broadway  Surface  Railway  Company  a  franchise  to  operate 

1  The  Wall  Street  Bank  was  founded  in  1838  as  the  Mechanics’  Banking  Association,  and  had  been 
for  a  time  a  national  bank.  It  never  resumed  payment  after  the  suspension. 

1  Mr.  Sharp  was  found  guilty  of  bribery  in  June,  1887,  in  connection  with  the  granting  of  the  fran¬ 
chise.  He  obtained  from  the  Court  of  Appeals  the  right  to  a  new  trial,  and  died  while  awaiting  it. 


322 


THE  NEW  YORK  STOCK  EXCHANGE 


Election  of  the 
first  Democratic 
President  since 
ante-bellum 
days. 


a  street  car  line  on  Broadway.  It  was  rushed  through  by  the  “boodle” 
Board  of  Aldermen,  over  Mayor  Edson’s  veto.  This  franchise  was  the 
nucleus  about  which  the  Metropolitan  Street  Railway  Company  was  ulti¬ 
mately  built  up. 

The  Presidential  election  took  place  on  November  4,  1884,  and  the 
people  signified  their  dissatisfaction  with  the  existing  condition  of  the 
country  by  terminating  the  Republican  party’s  twenty-four-year  period  of 
power.  Grover  Cleveland,  the  Governor  of  New  York  State, 
was  chosen  Chief  Executive,  defeating  Mr.  Blaine.  It  had  been 
generally  believed  that  a  Democratic  success  would  break  the 
market.  But  Mr.  Cleveland’s  clean  record  and  high  character 
were  not  without  effect.  The  market  showred  only  a  slight 
tendency  to  decline  on  November  5th,  although  Union  Pacific  stock  went 
off  about  three  points.  The  railroad  was  in  no  position  to  square  its 
accounts  with  the  Government,  and  it  was  the  prevalent  impression  that 
Mr.  Cleveland  would  be  severe  with  it. 

Heavy  selling  of  Delaware,  Lackawanna  &  Western  stock  took  place  on 
December  12th  and  13th,  the  price,  which  had  been  111  on  December  1st 
and  139%  earlier  in  the  year,  falling  to  97%.  By  December  29th  it  had 
dropped  to  89%,  and  it  reached  82%  in  the  following  month.  This  was  a 
result  of  the  liquidating  of  the  White  pool  in  Lackawanna.  Mr.  S.  Y.  White 
had  sent  out,  on  December  12th,  a  notice  to  his  customers  to  the  effect  that 
he  had  sold  most  of  his  Lackawanna  and  all  of  theirs,  provided  they  desired 
to  accept  the  sales.  Doubtless  they  did  so  “desire,”  on  perceiving  the  sub¬ 
sequent  course  of  the  stock. 


SN  1885  the  tide  of  stock  market  prosperity,  wrhich  had  been  briskly 
running  out  since  the  Garfield  assassination  and  the  termination  of 
the  specie  resumption  boom,  shifted  again  to  the  flood.  The  welcome 
change  came  in  July,  turning  upon  the  settlement  of  the  West  Shore  diffi¬ 
culty.  A  magnificent  corn  crop  of  the  previous  year  then  began  swelling  the 
earnings  of  the  railroads,  peace  succeeded  their  battles  over  rates,  the 
retail  trade  of  the  country  expanded  and  flourished,  prices  of  commodities 
rose,  and  the  market  experienced  one  of  the  phenomenal  bull  movements  of 
its  history. 

The  early  portion  of  the  year  requires  no  extended  comment.  It  was 
gloomy  in  the  extreme.  On  January  15th  the  great  Pittsburg  iron  firm  of 
Oliver  Bros.  &  Phillips  failed  with  liabilities  of  several  millions.  The  stop¬ 
page  wras  produced  by  an  enormous  payroll  carried  in  hard  times.  This 
very  day  J.  J.  Cisco  &  Co.,  a  prominent  New  York  Stock  Exchange  house, 
suspended  payment,  owing  upward  of  $2,000,000,  and  causing  a  drop  of 


FRESH  BATTLES  AMONG  THE  RAILWAYS 


323 


A  failure  with 
which  Mrs. 
“Hetty”  Green 
had  something 
to  do. 


one  or  two  per  cent,  in  securities  on  the  16th.  The  firm  was  carrying  a 
large  amount  of  Houston  &  Texas  Central  Railroad  bonds.  Collis  P. 
Huntington’s  Southern  Development  Company  was  a  heavy 
shareholder  in  the  railroad.  Mr.  Huntington  had  used  some 
Southern  Development  cash  to  make  advance  purchases  of 
Houston  &  Texas  Central  coupons,  thereby  injuring  the  road’s 
credit  and  depreciating  its  bonds.1  Furthermore,  the  Ciscos, 
who  were  custodians  of  about  $25,000,000  in  securities  and  $475,000  in 
cash  belonging  to  Mrs.  Edward  H.  Green,  were  suddenly  called  upon  to 
repay  her  the  cash  for  transfer  to  the  Chemical  Bank.  Inability  to  respond 
forced  them  into  bankruptcy.  Mrs.  Green,  familiarly  known  as  “Hetty” 
Green,  is  the  most  remarkable  woman  ever  known  in  American  finance. 
She  is  the  daughter  of  a  New  Bedford  whaler,  named  Robinson,  who 
gathered  a  fortune  said  to  be  nine  millions.  This  and  a  later  inheritance  of 
four  millions  were  the  nucleus  of  Mrs.  Green’s  wealth.  She  had  increased  it 
to  some  thirty-five  or  forty  millions  at  this  time  by  the  exercise  of  an 
extraordinary  native  shrewdness  and  the  practice  of  fearful  economies. 
Her  husband  owed  the  Messrs.  Cisco  some  $800,000  at  the  time  she 
demanded  her  cash,  but  she  refused  to  take  this  fact  into  consideration. 

In  March,  1885,  the  Stock  Exchange  recognized  the  growth  of  corpora¬ 
tions  formed  for  dealing  in  commercial  products,  and  now  First  dealing 
known  as  “industrials,”  by  the  adoption  of  a  constitutional 
amendment  creating  an  “unlisted  department,” in  which  their 
shares  might  be  bought  and  sold.  It  paved  the  way  for  a  new  and  most 
important  branch  of  speculative  activity. 

Earl}7  in  this  month  there  occurred  a  strike  of  the  mechanics  and  sec¬ 
tion  hands  on  the  Wabash,  Missouri  Pacific,  and  other  Gould  roads,  com¬ 
prising  some  10,000  miles.  The  wrages  of  the  men  had  been  cut  in  the 
previous  October.  They  succeeded  in  restoring  the  old  rate  in  about  ten 
days.  On  March  19th  the  market  was  broken  by  the  news  that  the  Central 
Pacific  would  thereafter  charge  the  Union  Pacific  full  local  m 

°  Temporary  die- 

rates  west  from  Ogden.  Mr.  Huntington,  of  the  Central  ruption  of  the 
Pacific,  had  developed  his  “Sunset  Route”  (by  steamer  from  transconti- 
New  York  to  New  Orleans  and  thence  to  San  Francisco  nental  pool‘ 
by  way  of  the  Southern  Pacific),  and  was  feeling  independent.  The 
Union  Pacific  announced  that  it  would  depend  on  its  Oregon  Short 
Line,2  connecting  with  the  Oregon  Railway  &  Navigation  Company  in 
Oregon,  to  reach  the  Pacific  Coast  and  that  it  would  no  longer  continue 


in  “unlisted” 
stocks. 


irThe  trustees  of  these  bonds,  Nelson  S.  Easton  and  James  Rintoul,  were  later  made  receivers  of  the 
road.  They  ultimately  succeeded  in  recovering  for  the  bondholders  their  capital,  interest,  and  interest 
upon  interest. 

2  The  Oregon  Short  Line  Railroad  Company  connected  Granger,  Wyoming,  with  Huntington,  Oregon. 
It  leased  the  Oregon  Railway  &  Navigation  Company  for  six  per  cent,  on  the  stock  in  April,  1887,  Union 
Pacific  guaranteeing  the  rental. 


324 


THE  NEW  YORK  STOCK  EXCHANGE 


its  half  of  a  monthly  subsidy  of  $95,000,  which  the  two  great  Pacific 
roads  were  paying  the  Pacific  Mail  Steamship  Company  to  maintain  rates. 
Pacific  Mail  stock,  which  had  sold  on  March  16th  at  62,  dropped  to  47% 
on  March  21st,  while  Union  Pacific  fell  to  41,  a  loss  of  six  points  and  a 
half,  in  the  same  time.  On  the  25th  Messrs.  Gould  and  Sage  were  dropped 
from  the  Union  Pacific  Railroad  directorate.  Mr.  Sage,  who  knew  in 
advance  that  the  Boston  party  would  force  them  out  and  that  the  subsidy 
arrangement  would  be  attacked,  is  credited  with  having  made  a  large 
sum  by  bearing  Pacific  Mail.  The  railroad  fight  was  ultimately  settled, 
and  in  May  the  subsidy  was  reduced  to  $85,000  a  month. 

In  June,  1885,  Chauncey  M.  Depew  was  elected  president  of  the  New 
York  Central.  On  July  7th  J.  Pierpont  Morgan  called  on  George  B. 
Roberts,  president  of  the  Pennsylvania  Railroad  Company,  and  suggested 
that  a  truce  be  patched  up  between  the  then  warring  trunk  lines,  unfolding 
a  plan  by  which  the  New  York  Central  was  to  acquire  control  of  the  West 
Shore  and  thus  eliminate  the  situation’s  most  disturbing  factor.  The 
visitor  and  his  suggestion  were  heartily  received.  It  came  about  that  the 
ending  of  the  Central’s  immediate  troubles  smoothed  the  way  for  trunk  line 
peace.  The  West  Shore  had  been  a  notorious  rate  cutter  from  the  begin¬ 
ning.  Its  five  per  cent,  bonds,  which  sold  at  82%  in  April,  1883,  had  fallen 
to  28%  in  April,  1885,  while  New  York  Central  stock  was  driven  down  to 
81%  in  June  of  the  latter  year,  the  dividend  being  cut  from  eight  to  two  per 
cent.1  Mr.  Morgan’s  scheme,  backed  by  Mr.  Vanderbilt,  was  soon  carried 
into  effect. 

Late  on  the  afternoon  of  July  27th  Drexel,  Morgan  &  Co.  issued  to  the 
first  mortgage  bondholders  of  the  West  Shore  a  circular  letter  announcing 
that  the  New  York  Central  had  agreed  to  lease  the  former  property  for 
475  years,  after  its  sale  in  foreclosure.  The  West  Shore,  if  the  plan  were 

The  West  shore  accePtable>  would  be  sold  to  a  new  company,  which  would 
settlement.  issue  $25,000,000  of  new  four  per  cent,  bonds  in  exchange  for 

j.  Pierpont  the  outstanding  $50,000,000  of  five  per  cent.  West  Shore 

^eltToup0^ r8t  bonds,  and  stock  to  the  amount  of  $10,000,000,  the  latter  to 

turns  the  market  belong  to  the  New  York  Central.  The  rental  paid  by  the  Cen¬ 
tral  was  to  be  the  interest  of  the  new  bonds.  This  scheme, 
which  virtually  paid  the  West  Shore  bondholders  50  cents 
on  the  dollar,  was  Mr.  Morgan’s  first  great  achievement  as  a  harmonizer. 
It  was  crowned  with  signal  success.  Central  stock  had  already  risen  in 
anticipation  of  the  announcement.  On  the  day  following  it  sold  at  99, 
West  Shore  firsts  rising  to  44%,  and  the  ebb  tide  of  the  stock  market  gave 
way  to  the  flood. 

1The  New  York  Central,  in  the  fiscal  year  1880,  earned  $10,569,200  on  its  stock;  in  1883  it  earned 
$4,327,155;  in  1884,  $4,668,760,  and  in  1885,  $2,176,343. 


in  the  summer 
of  1885 


FRESH  BATTLES  AMONG  THE  RAILWAYS 


325 


By  August  29th  all  but  $2,500,000  of  the  outstanding  West  Shore 
bonds  had  come  into  the  Morgan  agreement.  The  plan  was  duly  consum¬ 
mated,  the  West  Shore  road  sold  in  foreclosure,  and  the  lease  to  the  Central 
made  from  January  1,  1886. 

Good  railroad  earnings,  advances  in  the  prices  of  steel  rails  and  coal, 
and  expansion  in  retail  trade,  accelerated  the  bull  movement,  which  began 
with  the  West  Shore  settlement  and  lasted  through  the  remainder  of  the 
year.1  It  swelled  the  earnings  of  commission  houses  and  brought  the 
biggest  bears  to  grief.  On  September  29th  the  Stock  Exchange  house  of 
Soutter  &  Co.  by  suspending  payment  ended  an  ill-advised  campaign  of 
opposition.  The  morning  of  October  2d  saw  the  failure  of  the  celebrated 
firm  of  William  Heath  &  Co.,  which  had  enjoyed  Mr.  Gould’s  intermittent 
favors  since  the  old  Black  Friday  days.2  The  house  had  been  enormously 
short  of  the  market.  After  its  failure  was  announced  on  ’Change  43,700 
shares  were  bought  and  3,100  sold  “under  the  rule”  for  its  wiIliam Heath & 
account.  Its  liabilities  were  estimated  at  $1,200,000,  its  Co.  fail.  End  of 


assets  at  $400,000.  The  woes  of  Mr.  Heath  were  chiefly  the  Henry  Nelson 
work  of  one  large  client,  Henry  Nelson  Smith,  who  had  been  Smith  8  career' 
carrying  a  short  interest  involving  him  in  a  reported  loss  of  $1,700,000. 
Mr.  Smith  was  one  of  the  most  prominent  operators  then  in  the  Street. 
He  had  deserted  the  clothing  business  in  Buffalo  to  come  to  this  city  in 
1860,  had  flourished  for  a  while  as  Jay  Gould’s  partner  in  the  firm  of 
Smith,  Gould,  Martin  &  Co.,  had  dropped  several  millions  a3  the  result  of 
the  North-Western  corner  of  1872  and  the  panic  of  1873,  and  had  recouped 
in  a  measure  only  to  see  his  resources  again  depleted  by  an  attempt  to 
fight  the  upward  trend  of  prices.  In  the  early  part  of  the  year  Mr.  Smith 
was  associated  as  a  bear  with  Mr.  Woerishoffer.  But  the  German  guerilla 


1  The  extent  of  the  rise  in  the  latter  half  of  1885  will  be  appreciated  by  a  glance  at  the  following  table : 
o Low  Prices,  High  Prices, 
bTOCKS-  July,  1885.  Nov.,  1885. 

New  York  Central, . 83%  107% 

Pennsylvania  Railroad, . 91%  112% 

Missouri  Pacific, . 91  106 

Union  Pacific, .  45  62% 

St.  Paul, .  70  99 

Chesapeake  &  Ohio,  .  7%  23% 

Reading,  . 13%  25% 

Erie  (New  York,  Lake  Erie  &  Western), .  22  57 

Chicago  &  North-Western, . 91%  115% 

Western  Union, . 59%  81% 


2  At  the  time  of  Heath’s  suspension  his  firm  owed  Jay  Gould  $260,000.  Furthermore,  G.  P. 
Morosini,  who  was  understood  to  represent  a  Gould  pool  in  the  matter,  had  securities  valued  at  $215,000 
in  the  firm’s  custody,  and  caused  the  subsequent  arrest  of  Mr.  Heath  in  a  civil  action,  alleging  that  his 
stocks  and  bonds  had  been  fraudulently  hypothecated.  It  is  reported  that  Messrs.  Morosini,  Gould,  and 
others  had  been  bulling  Manhattan  with  the  intent  to  twist  the  shorts,  and  were  surprised  to  find  that 
among  the  Manhattan  certificates  delivered  to  them  were  2,380  shares  which  had  been  intrusted  to 
Heath’s  keeping,  and  that  they  were  buying  up  their  own  stock.  This  tale,  however,  is  apocryphal. 

Mr.  Heath  was  noted  for  the  swiftness  of  his  market  turns,  and  for  his  tall,  gaunt  figure,  long, 
sweeping  mustache,  and  a  peculiar,  rapid  stride.  His  physical  characteristics  earned  him  a  rather  striking 
sobriquet,  “  The  Great  American  Reindeer.” 


326 


THE  NEW  YORK  STOCK  EXCHANGE 


of  finance  had  the  foresight  to  turn  his  position  in  good  time  and  escape 
the  disaster  which  overwhelmed  his  confederate. 

The  failure  of  bear  speculators  in  a  rising  market  is  never  likely  to 
unsettle  confidence.  Prices  were  halted  for  the  day,  only  to  resume  their 
advance.  The  public  was  in  the  field.  The  operations  of  Philip  D.  Armour, 
who  seemed  to  have  turned  for  the  moment  from  the  packing  of  pork  to 
the  shearing  of  wool,  shoved  up  St.  Paul  and  stimulated  the  growing 
speculative  fury.  On  November  19th  the  sales  at  the  Board  aggregated 
814,225  shares,  a  very  large  day’s  business  for  that  time. 

William  H.  Vanderbilt’s  death,  in  the  following  month,  furnished  the 
real  check  to  the  “boom”  of  1885.  Mr.  Vanderbilt  possessed  neither  the 
creative  genius  nor  the  indomitable  will  of  his  father.  He  was  a  great 
owner  and  not  a  great  builder.  But  the  Street  recognized  him  as  a  shrewd 
conserver  of  the  properties  in  which  his  enormous  wealth  was  invested,  and 
feared  that  the  scattering  of  his  shares  among  his  children  might  result  in 
throwing  many  of  them  on  the  market.1  Mr.  Vanderbilt  died  on  the  after¬ 
noon  of  Tuesday,  December  8th,  in  the  study  of  his  home,  at 
K^andert.'iit!11'1  Fifth  Avenue  and  Fortieth  Street.  He  was  conversing  with 
Robert  Garrett,  president  of  the  Baltimore  &  Ohio,  in  reference 
to  his  visitor’s  wish  to  purchase  some  of  the  Vanderbilt  Staten  Island 
property  for  a  terminal,  when  he  was  seized  with  apoplexy  and  died  in  a 
few  moments.  Lake  Shore,  which  closed  that  day  at  88,  sold  at  84  on  the 
curb  when  the  news  arrived  downtown.  Pools  in  which  J.  P.  Morgan,  Jay 
Gould,  Russell  Sage,  Cyrus  W.  Field,  and  E.  D.  Adams  were  concerned  were 
formed  in  the  evening  to  support  the  market.  However,  Central,  which 
had  closed  at  104%  that  day,  touched  102%  on  Wednesday,  and  Lake  Shore 
sold  at  84 %,  and  closed  at  86%  bid.  These  stocks  sold  at  101%  and  81%, 
respectively,  within  a  fortnight.  The  “boom  ”  was  over. 

The  year  1886  was  prolific  of  net  advances  in  the  prices  of  stocks, 
although  their  course  was  extremely  irregular.  It  was  likewise  marked  by 
“Trusts”  a  broadening  speculation,  about  101,000,000  shares  changing 
popular  term  hands,  as  against  some  91,000,000  in  1885.  There  was 
m  1886.  a  greater  increase  in  railway  construction  than  had  taken 

place  in  any  year  since  1882. 2  Prosperity  flourished  in  the  channels  of 

1  Mr.  Vanderbilt’s  will  divided  $80,000,000  equally  among  his  eight  children,  and  in  addition  left 
$3,000,000  to  Cornelius  Vanderbilt,  the  eldest  son,  and  his  family.  The  residuary  estate  was  divided 
equally  between  Cornelius  and  William  Kissarn  Vanderbilt,  the  two  oldest  sons.  It  has  been  estimated  at 
more  than  $100,000,000. 

2  Following  is  a  table  showing  the  number  of  railway  miles  in  operation  at  the  end  of  each  railway 

year  from  the  resumption  of  specie  payments  until  and  including  1886,  with  the  respective  yearly  increases 
in  mileage:  Miles  _ _  Miles  . „„ 

Operated.  Incbease‘  Operated,  ^c®12-4812- 

1879,  ....  86,463  4,746  1883,  ....  121,454  6,741 

1880,  ....  93,349  6,886  1884,  ....  125,379  3,925 

1881,  ....  103,145  9,796  1885,  ....  128,987  3,608 

1882,  ....  114,713  11,568  1886,  ....  137,986  8,999 


FRESH  BATTLES  AMONG  THE  RAILWAYS 


327 


trade.  The  two  features  of  industrial  life  which  awakened  apprehension 
were  the  silver  dollar  inflation,  constantly  increasing  through  the  workings 
of  the  Bland  law  of  1878,  and  the  multiplication  of  the  large  industrial 
corporations  to  which  the  title  “trusts”  was  already  being  applied. 

Coal  stocks  were  the  speculative  leaders  in  the  early  part  of  the  year. 
Coal  prices  were  cut  in  January,  1887,  inducing  weakness  in  the  shares  of 
the  anthracite  carriers.  Yet  they  recovered  ground  rapidly  in  the  early 
part  of  the  next  month,  Reading  advancing  from  18 %  to  26%,  New  Jersey 
Central  from  44%  to  55%,  Delaware  &  Hudson  from  90%  to  108%,  and  Lack¬ 
awanna  from  119%  to  135%,  although  a  pending  plan  for  the  reorganization 
of  the  Reading  was  yet  in  embryo.  February  was  also  notable  for  a  sale  by 
Jacob  Sharp,  George  Law,  Alfred  Wagstaff,  and  others  of  10,000  shares  of 
stock  of  the  Broadway  and  Seventh  Avenue  Railroad  Company,  which  had 
control  of  the  Broadway  Surface  Railway  Company,  to  William  C.  Whitney, 
W.  L.  Elkins,  and  Peter  A.  B.  Widener.  The  transaction,  which  involved  an 
average  price  of  $292.50  a  share,  was  the  forerunner  of  the  Metropolitan 
Street  Railway  Company.  In  the  same  month  the  Pacific  Mail  Company 
received  notice  of  the  complete  disruption  of  the  transcontinental  pool  and 
the  withdrawal  of  the  subsidy  of  $85,000  a  month  previously 
paid  to  it  for  maintaining  rates.  The  company  bought  two  poof8C°^nental 
new  steamers  and  its  railroad  rivals  proceeded  to  cut  rates 
between  San  Francisco  and  Chicago.  Shortly  thereafter  the  Reading  Reor¬ 
ganization  Committee,  J.  Pierpont  Morgan,  John  Lowber  Welsh,  and  John 
C.  Bullitt,  issued  a  statement  to  the  effect  that  Austin  Corbin  had  joined 
them.  Mr.  Corbin  was  acting  for  Franklin  B.  Gowen,  the  former  Reading 
president,  who  had  secured  control  of  some  67,000  shares  previously  owned 
by  the  Vanderbilts,  and  had  been  threatening  to  block  the  reorganization 
plan.  The  announcement  that  harmony  was  assured  aided  all  the  coal 
stocks,  and  on  March  6th  Reading  sold  at  $30  a  share. 

The  same  day  saw  a  renewal  of  the  strike  on  the  Gould  southwestern 
roads,  under  the  direction  of  the  Knights  of  Labor.1  This  strike  (which 
lasted  until  May  4th),  and  a  subsequent  agitation  in  favor  of  Mr.  Morgan, 
an  eight-hour  work  day,  which  made  itself  felt  throughout  the  having  made  the 
country,  helped  to  depress  stock  prices.  The  best  bull  argu-  ^tion1sure,rgan 
ment  of  the  period  was  the  establishment  of  a  new  coal  pool,  strengthens  the 
On  March  23d  J.  Pierpont  Morgan,  whose  fame  as  an 


anthracite 
situation  by  his 


organizer  was  rapidly  growing,  gave  an  elaborate  dinner  at  “gentlemen’s 
his  home,  the  guests  including  George  B.  Roberts,  president  of  agreement.” 
the  Pennsylvania  Railroad ;  Samuel  Sloan,  president  of  the  Lackawanna ; 


1  This  strike  was  led  chiefly  by  Martin  Irons,  chairman  of  the  Executive  Board  of  District  Assembly 
101,  K.  of  L.,  although  T.  V.  Powderly,  General  Master  Workman  of  the  Knights  of  Labor,  took  a  promi¬ 
nent  part  in  it.  The  men  contended  that  the  arbitration  agreement  of  1885  had  been  violated.  The  strike 
was  attended  with  some  bloodshed,  and  resulted  in  victory  for  the  railroads. 


328 


THE  NEW  YORK  STOCK  EXCHANGE 


Death  of  Mr. 
Woerish  offer. 


E.  J.  Wilbur,  president  of  the  Lehigh  Valley ;  George  de  B.  Keim,  receiver 
of  the  Reading;  R.  M.  Olyphant,  president  of  the  Delaware  &  Hudson 
Canal  Company,  and  John  King,  president  of  the  Erie.  The  diners 
effected  a  “gentlemen’s  agreement,”  by  which  the  anthracite  produc¬ 
tion  for  the  year  ending  April  1, 1887,  was  restricted  to  33,500,000  tons, 
and  the  price  of  coal  was  advanced  25  cents  a  ton  immediately. 

On  Sunday,  May  9th,  Charles  F.  Woerishoffer  ended  his  career  at  the 
country  seat  of  Oswald  Ottendorfer,  Manhattanville.  Mr.  Woerishoffer’ s 
death  was  due  to  heart  disease.  He  had  been  in  indifferent  health  since  the 
beginning  of  the  year,  and  had  severed  his  connection  with  Woerishoffer  & 
Co.,  intending  soon  to  start  upon  a  trip  to  Europe.  Evidently  it  wms  his 
intention  to  rid  himself  of  all  speculative  commitments  before 
sailing.  He  had  covered  practically  all  his  short  contracts — 
about  200,000  shares  — but  still  held  an  interest  in  a  bull 
wheat  pool,  estimated  at  8,000,000  bushels.  His  death  was  announced  at 
the  Stock  Exchange  on  Monday.  A  committee  was  appointed  to  draft 
resolutions  expressive  of  the  esteem  which  his  courage,  brains,  and  gen¬ 
erosity  had  won  for  him.  The  wheat  market  paid  an  immediate  tribute  to 
his  prowess.  A  break  of  three  cents  in  the  May  option  followed  the  news 
of  Mr.  Woerishoffer’s  demise. 

Within  a  brief  time  after  the  death  of  Wall  Street’s  greatest  bear  the 
market’s  tendency  toward  weakness  had  been  checked,  although  no  sharp 
upward  movement  was  to  be  seen  before  the  autumn.  A  battle  over  cable 
tolls  between  the  Commercial  Cable  Company  and  the  Western  Union,  and 
the  passing  of  the  latter’s  dividend  in  June,  failed  to  seriously  affect  prices. 
The  market  was  somewhat  irregular  in  the  following  month.  A  monetary 
stringency,  which  carried  the  call  rate  to  forty  per  cent.,  and  the  breaking 
away  of  the  Baltimore  &  Ohio  from  the  trunk  line  pool,  owing  to  the  Penn¬ 
sylvania’s  refusal  to  give  the  road  an  outlet  to  New  York,  aided  the  bears 
in  August.  But  this  mishap  was  balanced  by  the  patching  up  of  a  Western 
traffic  agreement.  In  the  fall  the  effects  of  a  prosperous  trade,  large  bank 
clearances,  and  fine  crops  engendered  one  of  those  public  rushes  to  the 
market  which  inevitably  mean  a  rapid  advance  in  prices  and  an  ultimate 
severe  reaction.  The  leaders  in  the  advance  were  Reading — aided  by  the 
news  that  the  property  would  be  restored  to  the  shareholders  and  that 
Austin  Corbin  would  succeed  to  the  presidency  of  the  company  — and  the 
Richmond  &  West  Point  Terminal  and  Richmond  &  Danville  stocks. 
Reading  wras  forced  to  53%  in  November.  Richmond  &  Danville  advanced 
from  144  to  200  within  a  few  weeks  On  December  7th  the  decision  of 
Judge  Gresham  at  Chicago,  removing  Messrs.  Humphrey  and  Tutt  from 
the  receivership  of  the  Wabash  lines  east  of  the  Mississippi  and  appoint¬ 
ing  John  McNulta  in  their  place,  virtually  shattered  the  Wabash  reorgani- 


FRESH  BATTLES  AMONG  THE  RAILWAYS 


329 


zation  scheme,1  broke  Wabash  stock  three  points  and  checked  public 
enthusiasm.  On  the  15th,  with  call  money  at  ten  per  cent.,  came  the  crash 
which  the  great  bull  movement  had  invited.  There  had  been  Breaking  up  of 
two  previous  days  of  weakness.  The  heavy  liquidation  of  the  Wabash 
the  15th  created  a  market  of  1,096,509  shares,  breaking  all  8ystem- 
previous  records  on  ’Change,  and  produced  one  small  failure— that  of 
L.  Marx  &  Co.  Between  the  closing  prices  of  Saturday,  December  11th, 
and  the  low  levels  of  the  following  Monday,  there  was  an  average  difference 
of  five  or  six  points  in  the  leading  stocks.  The  most  startling  fall  was  in 
Richmond  &  West  Point  Terminal,  which  dropped  from  44%  to  30  in  this 
brief  period. 

The  extraordinary  rise  of  the  Richmond  stocks,  prior  to  the  speculative 
collapse,  was  due  to  the  purchase  of  the  control  of  the  Richmond  &  Danville 
road  by  the  Richmond  &  West  Point  Terminal  Railway  &  Warehouse  Com¬ 
pany.2  The  party  interested  in  this  purchase  was  headed  by  Alfred  Sully. 
Calvin  S.  Brice,  Samuel  Thomas,  Henry  M.  Flagler,  and  John  H. 
Inman  were  among  his  colleagues.  Mr.  Sully  had  assumed  the  presidency 
of  both  roads.  He  was  in  administrative  control  of  an  important  system 
connecting  Richmond  with  Atlanta  and  ramifying  through  the  heart  of 
the  South  in  branches  whose  mileage  ran  into  the  thousands.  He  con¬ 
ceived  the  plan  of  acquiring  a  still  more  important  property,  which  chanced 
to  be  in  the  market,  and  uniting  it  with  the  Richmond  roads.  This  was 
the  Baltimore  &  Ohio. 

To  understand  the  series  of  negotiations  of  which  the  Baltimore  &  Ohio 
was  the  object  in  1887  it  must  be  realized  that  this  trunk  line  occupied  at 
the  time  a  rather  isolated  position.  Under  the  presidency  of  John  W. 
Garrett  the  property  had  enjoyed  an  honored  and  prosperous  career.  But 
Mr.  Garrett  had  passed  away,  bequeathing  to  his  son,  Robert,  his  office 
and  a  number  of  schemes  for  the  development  of  the  road’s  resources,  which 
worked  out  in  a  deleterious  fashion.  The  Baltimore  &  Ohio  Telegraph 
Company  and  the  road’s  express  service  were  losing  ventures.  In  an  effort 
to  reach  the  greatest  of  Atlantic  ports  a  line  had  been  constructed  from 
Baltimore  to  Philadelphia,  with  poor  success,  and  an  extension  to  New 
York  was  projected.  The  road  still  carried  a  great  nominal  surplus,  yet  it 

1  The  Wabash  lines  were,  however,  reunited  by  a  reorganization  effective  in  April,  1889. 

2  The  Richmond  &  Danville  road,  which  was  earning  eight  per  cent,  on  a  capital  stock  of  $5,000,000, 
ran  from  Richmond  to  Danville,  Virginia,  and  controlled  by  lease  various  lines,  which  ran  as  far  south  as 
Atlanta,  Georgia.  The  system  comprised  854  miles.  The  Richmond  &  West  Point  Terminal  Railway  & 
Warehouse  Company  had  been  formed  in  1880  to  acquire  lines  that  did  not  directly  connect  with  the  Rich¬ 
mond  &  Danville,  which  was  prevented  by  its  charter  from  such  an  acquisition.  The  primary  object  in  the 
manoeuvre  was  to  benefit  the  Richmond  &  Danville  system.  Harmony  between  the  various  interests  in  the 
properties  was  spoiled  in  April,  1886.  The  Warehouse  company  controlled  4,000  miles  of  road  at  the 
time.  A  faction  in  its  directorate,  headed  by  George  S.  Scott,  was  apparently  managing  the  property  in 
the  interests  of  the  Richmond  &  Danville  road,  and  succeeded  in  leasing  to  the  latter  company  four  minor 
roads  owned  by  the  Warehouse  company.  This  induced  the  Warehouse  directors  who  opposed  Mr.  Scott’s 
policy  to  buy  the  control  of  the  Richmond  &  Danville.  They  went  into  the  market  and  succeeded,  after 
terrific  competition,  in  getting  25,001  shares,  a  bare  majority. 


330 


THE  NEW  YORK  STOCK  EXCHANGE 


had  acquired  a  floating  debt  which  threatened  to  throw  it  into  a  receiver’s 
hands.  Robert  Garrett  was  looking  about  for  some  one  to  relieve  him  of 
his  burden. 

Nevertheless,  the  Baltimore  &  Ohio  was  a  property  of  great  inherent 
worth.  Its  line  ran  westward  from  Baltimore,  through  Maryland,  into 
West  Virginia  as  far  as  Parkersburg,  connected  Grafton,  West  Virginia, 
with  Wheeling,  West  Virginia,  shot  into  Pittsburg,  tapping  the  great 
source  of  steel  and  iron  freights,  and,  from  a  point  below  Wheeling,  ran 
west  into  Ohio,  where  it  touched,  among  other  points,  Zanesville,  Newark, 
Columbus,  Cincinnati,  and  Sandusky,  on  Lake  Erie.  From  Chicago  Junc- 
The  Baltimore  &  ti°G>  a  few  miles  south  of  Sandusky,  it  ran  through  Ohio, 
Ohio’s  struggle  Indiana,  and  Illinois  to  Chicago.  Thus,  although  it  lacked  a 
with  its  rivals,  connection  with  St.  Louis  on  the  west  and  with  New  York  on 
the  east,  it  was  a  powerful  system.  Instead  of  developing  its  seaport 
advantages  at  Baltimore  by  the  building  of  an  adequate  mercantile  fleet, 
Robert  Garrett  had  aimed  his  endeavors  at  a  New  York  outlet.  Being 
rebuffed  by  the  Pennsylvania,  whose  line  to  this  city  he  desired  to  use,  he 
let  it  be  known  that  he  intended  to  build  a  branch  to  New  York.  Mean¬ 
while,  the  road  was  disturbing  the  trunk  line  situation  by  the  cutting 
of  rates. 

What  Mr.  Sully  planned  to  do  with  the  Baltimore  &  Ohio  is  mere 
matter  of  conjecture.  The  lines  of  the  system  touched  his  properties  in 
Virginia,  and  the  junction  made  it  possible  to  effect  some  advantages  by  a 
merger.  The  Baltimore  &  Ohio  had  outstanding  147,000  shares  of  com¬ 
mon  stock  (carrying  the  voting  power)  and  50,000  shares  of  preferred. 
Mr.  Sully  obtained  from  Mr.  Garrett  an  option  on  80,000  shares  of  the 
An  ambitious  common,  at  $ 200  a  share,  payment  to  be  made  in  cash  to  the 
scheme  amount  of  $6,000,000,  and  in  $10,000,000  of  Richmond  & 

frustrated.  West  Point  Terminal  collateral  trust  bonds.  The  terms 
necessitated  the  production  of  $1,000,000  in  cash  at  once.  Mr.  Sully’s 
associates  refused  to  approve  the  project,  and  it  fell  through  abruptly. 

At  this  juncture  the  situation  was  enlivened  by  the  intervention  of 
Henry  S.  Ives,  the  second  of  Wall  Street’s  notabilities  to  attain  the  title  of 
a  “Young  Napoleon  of  Finance.”  “Napoleon”  Ives  and  “Napoleon” 
Ward  exhibited  many  points  of  similarity.  Each  dazed  the  heads  of  older 
men,  and  reached  a  position  of  much  influence  and  prominence  within  a 
brief  time.  Each  carried  on  an  extensive  swindle  under  the  guise  of  legiti¬ 
mate  finance.  But  their  careers  differed  in  results.  Ferdinand  Ward 
brought  about  a  panic  and  acquired  a  convict’s  stripes.  Ives  was  neither 
important  enough  for  the  one  nor  unfortunate  enough  for  the  other. 

Although  Mr.  Ives’  performances  rank  far  below  the  first  order  of 
monetary  events,  they  created  a  sharp  temporary  disturbance.  Ives  was 


FRESH  BATTLES  AMONG  THE  RAILWAYS 


331 


about  twenty-four  years  old  when  he  began  negotiating  for  Mr.  Garrett’s 
property.  He  was  a  native  of  Connecticut,  who  had  come  to  this  city  as  a 
penniless  youth,  had  worked  by  turns  as  a  publishing  house  clerk,  bank 
clerk,  and  bond  broker,  and  had  then  suddenly  appeared  as  the  head  of  a 
Stock  Exchange  firm.  At  nineteen  he  was  earning  a  stipend  of  $10  a  week. 
At  twenty-four  he  controlled  property  worth  many  millions,  « Napoleon  ”  Ives 
and  was  recognized  as  a  rising  and  menacing  factor  in  the  rises  rapidly  to 
railway  world.  His  firm — Henry  S.  Ives  &  Co.— was  estab-  Prominence- 
lished  in  January,  1886,  and  comprised,  besides  himself,  George  H.  Stayner 
and  Thomas  C.  Doremus.  Stayner  shared  in  all  the  fraudulent  plans  of 
Ives,  following  him  even  to  the  bitter  end  of  indictment  and  disgrace. 
Doremus  was  the  Board  member.  When  the  partnership  was  first  formed 
the  Stock  Exchange  suspended  Mr.  Doremus,  because  of  the  bad  reputation 
Ives  had  earned  through  the  corrupt  manipulation  of  a  corner  in  Mutual 
Union  Telegraph  stock.  Unfortunately  the  suspension  was  soon  after¬ 
ward  revoked. 

In  brief,  Ives’  methods  consisted  in  buying  the  stock  of  a  promising 
railroad  and  in  the  immediate  hypothecation  of  it  for  money  with  which  to 
buy  more  stock,  the  hypothecation  of  the  second  purchase  and  a  continua¬ 
tion  of  the  game  until  he  had  acquired  control  of  the  property. 

The  fact  that  his  steady  purchasing  kept  raising  the  price  of  ^g^thod 
the  stock  increased  his  borrowing  capacity.  Once  in  control 
of  the  property,  and  filling  its  executive  positions  with  his  tools,  he  could 
loot  its  treasury  and  thus  obtain  the  means  to  plan  the  capture  of  another 
road.  Meanwhile  he  would  steal  enough  in  addition  to  enable  him  to  live 
in  luxury  and  create  a  great  public  impression.  He  was  rather  insignificant 
in  appearance,  short,  pale,  small  featured,  wearing  a  dapper  pair  of 
side  whiskers  and  peering  through  gold-rimmed  glasses.  But  general 
contempt  for  his  physique  was  swallowed  in  admiration  for  his  achieve¬ 
ments. 

Ives  needed  some  extraneous  money  to  carry  out  his  plans.  This  he 
obtained  by  ensnaring  Christopher  Meyer,  a  wealthy  German,  who  had 
made  a  fortune  in  rubber  and  was  readily  victimized  by  the  “  Young  Napo¬ 
leon’s”  plausible  tongue.  The  first  campaign  for  which  Meyer  contributed 
the  sinews  of  war  resulted  in  the  capture  of  the  Mineral  Range  Railroad, 
a  small  property  in  northern  Michigan.  Ives  then  transferred  his  opera¬ 
tions  to  Ohio.  In  the  summer  of  1886  he  marched  triumphantly  into  the 
citadel  of  the  Cincinnati,  Hamilton  &  Dayton  Railroad.  This  road  had 
$3,500,000  of  common  stock  on  which  it  was  paying  six  per  cent.,  about 
$450,000  of  six  per  cent,  preferred  stock,  a  funded  debt  of  $2,836,250, 
and  a  surplus  of  $2,635,709.  Ives  had  been  buying  the  common  stock  on 
an  upward  scale  and  had  advanced  the  price  to  $147  a  share.  He  next 


332 


THE  NEW  YORK  STOCK  EXCHANGE 


proceeded  to  lay  hands  on  the  Dayton  &  Ironton  and  Dayton  &  Chicago 
roads,  which  he  consolidated  during  the  summer  of  1887  in  the  Dayton, 

Fort  Wayne  &  Chicago,  with  $13,375,000  of  outstanding 
ofethencinciimati  stock.  Meanwhile  he  had  bought  control  of  the  Terre  Haute 
Hamilton  &  &  Indianapolis,  which  leased  two  other  roads,  the  whole 

Dayton  and an- comprjgjn™  so_called  Vandalia  line.  The  last  named 

dalia  systems.  ^ 

system  had  previously  served  as  the  great  Pennsylvania  Rail¬ 
road’s  outlet  to  St.  Louis,  and  was  of  enormous  importance.  Ives  made 
his  firm  the  fiscal  agent  of  the  Cincinnati,  Hamilton  &  Dayton,  and  forced 
the  authorization  of  $10,000,000  of  new  preferred  stock  of  that  road,  to 
aid  him  in  a  still  more  ambitious  project. 

It  is  the  hope  of  every  really  able  schemer  to  achieve  a  position  of 
respectability.  In  the  prosecution  of  his  most  unwarrantable  plans  he 
looks  forward  to  the  day  when  he  may  enjoy  the  luxury  of  an  honest  life. 
He  knows  that  the  only  really  comfortable  existence  must  be  led  within  the 
pale  of  the  law,  and  he  therefore  aims  to  acquire  enough  to  become  a  good 
citizen.  Ferdinand  Ward  certainly  knew  that  the  very  nature  of  his  game 
made  it  impossible  for  him  to  stave  off  a  ruinous  finale.  But  Ives  undoubt¬ 
edly  expected  something  better.  If  he  could  put  together  a  great  railroad 
system,  increasing  the  value  of  the  stock  he  carried  by  welding  his  proper¬ 
ties  into  a  harmonious  whole,  he  could  repay  a  part  of  his  sequestrations, 
cover  up  the  rest  and  become  a  railroad  magnate  and  an  ornament  to 
society.  It  is  possible  that  he  would  have  succeeded  in  doing  this  had  the 
powerful  men  whose  interests  he  threatened  been  content  to  sit  still. 

A  study  of  the  railroad  map  of  1887  makes  it  plain  that  by  uniting  the 
properties  under  his  control  with  the  Baltimore  &  Ohio,  Ives  would  have 
created  one  of  the  greatest  trunk  lines  of  the  world.1  He  would  have 
connected  St.  Louis  with  the  Atlantic  seaboard,  by  a  short  route,  and,  as 
he  controlled  the  Pennsylvania  outlet  to  St.  Louis,  would  have  been  able 
to  demand  from  the  Pennsylvania  directorate  an  entrance  into  New  York 
for  the  Baltimore  &  Ohio.  The  pendency  of  the  negotiations  which  he  now 
began  with  Robert  Garrett  for  the  control  of  the  Baltimore  &  Ohio, 
threatening  the  entire  trunk  line  situation,  wras  a  pall  over  the  stock 

1  The  Cincinnati,  Hamilton  &  Dayton  system  controlled  lines  running  from  Cincinnati,  on  the  Ohio 
River,  northward  through  Hamilton  and  Dayton  to  Toledo,  on  Lake  Erie,  and  crossing  at  Deshler,  Ohio 
(some  miles  south  of  Toledo),  a  line  of  the  Baltimore  &  Ohio  which  ran  from  Chicago  Junction,  Ohio,  west¬ 
ward  to  Chicago.  In  addition,  the  Cincinnati,  Hamilton  &  Dayton  ran  westward  from  Hamilton,  Ohio, 
to  Indianapolis,  Indiana.  There  it  joined  with  the  Vandalia  system,  which  continued  westward,  through 
Terre  Haute,  Indiana,  and  across  the  State  of  Illinois  to  East  St.  Louis,  which  is  separated  only  from 
St.  Louis  by  the  Mississippi  River.  The  Vandalia  likewise  ran  northward  from  Terre  Haute  through 
Indiana  to  South  Bend,  also  crossing  the  line  of  the  Baltimore  &  Ohio.  The  Dayton,  Fort  Wayne  & 
Chicago  ran  from  the  southerly  part  of  Ohio  in  a  northwesterly  direction  across  the  Cincinnati,  Hamilton 
&  Dayton  line  as  far  as  Delphos,  Ohio,  and  was  designed  to  push  west  to  Fort  Wayne,  Indiana.  Had 
Ives  joined  these  properties  to  the  Baltimore  &  Ohio  he  would  have  produced  a  system  based  on  Baltimore, 
Washington,  and  Philadelphia  in  the  east,  and  on  Chicago  and  St.  Louis  in  the  west,  and  touching  several 
Virginia  points,  Grafton,  Parkersburg,  and  Wheeling,  West  Virginia;  Pittsburg,  Pennsylvania;  Zanesville, 
Newark,  Columbus,  Sandusky,  Toledo,  Dayton,  Hamilton,  and  Cincinnati,  Ohio ;  Indianapolis,  Terre  Haute, 
Logansport,  South  Bend,  and  Fort  Wayne,  Indiana,  and  numberless  minor  points. 


FRESH  BATTLES  AMONG  THE  RAILWAYS 


333 


market  and  enraged  the  owners  of  the  Pennsylvania  road.  It  is  not 
surprising  that  mysterious  but  mighty  hands  threw  obstacles  upon 
his  path. 

Messrs.  Ives  and  Stayner  struck  a  bargain  with  Mr.  Garrett,  and 
signed  contracts  on  March  18, 1887,  for  the  purchase  from  him  of  34,000 
shares  of  Baltimore  &  Ohio  common  and  15,000  shares  of 
Columbus  &  Cincinnati  Midland  Railroad  stock  for  the  sum  Negotiations  of 
of  $7,270,000.  Of  this  amount  $4,500,000  was  to  be  paid  ^*1™*™* 
Mr.  Garrett  on  or  before  April  25th,  and  four  per  cent,  notes, 
maturing  at  various  times,  were  given  for  the  remainder.  The  stock,  until 
paid  for,  was  to  remain  in  Mr.  Garrett’s  hands.  He  was  getting  a  good 
price  and  was  anxious  to  sell.  As  the  obligations  of  Ives  and  Stayner 
matured,  and  their  unexpected  failure  to  get  from  the  money  lenders  the 
needed  accommodation  made  it  impossible  for  them  to  pay  what  they 
owed,  Mr.  Garrett  gave  them  one  extension  after  another.  Doubtless  he 
received  powerful  intimations  that  his  course  was  ill  regarded  in  high 
quarters.  At  all  events  he  suddenly  broke  off  his  negotiations  and  on 
July  20th  sent  a  letter  to  the  editor  of  the  Philadelphia  Record,  announc¬ 
ing  that  the  Ives  party  “did  not  at  the  appointed  time  comply  with  their 
engagements”  —  which  was,  of  course,  true — and  that  the  negotiations 
were  at  an  end.  Mr.  Garrett  had  received  for  his  option  $320,000  and 
15,800  shares  of  the  new  Cincinnati,  Hamilton  &  Dayton  road.  This 
bonus  he  refused  to  return.  Three  days  later  he  sailed  for  Europe. 

Henry  T.  Ives  &  Co.  brought  a  fruitless  suit  against  Mr.  Garrett  for 
the  return  of  the  cash  and  securities  deposited  with  him.  Their  credit  was 
ruined  and  the  demands  of  the  banks  were  too  heavy  to  meet.  On  August 
8th  a  small  block  of  Cincinnati,  Hamilton  &  Dayton  stock 
sold  on  ’Change  at  40.  This  low  price  may  have  been  ficti¬ 
tious — the  work  of  those  who  were  “gunning  ”  for  Ives.  It 
was  certainly  destructive  of  his  solvency,  in  view  of  the  great 
amount  of  the  stock  which  he  was  carrying  on  loans.  Stayner 
and  he  respectively  resigned  the  presidency  and  vice-presidency 
of  the  road  on  the  following  day,  being  succeeded  by  A.  Y.  Winslow  and 
Christopher  Meyer.  On  August  11th  the  failure  of  Henry  S.  Ives  &  Co. 
was  announced  on  the  Stock  Exchange,  and  was  greeted  with  ringing 
cheers.  The  pall  had  been  lifted  from  the  market. 1  The  liabilities  of  the 
bankrupt  firm  exceeded  $17,000,000.  Their  nominal  assets  were  more  than 
$25,000,000,  but  their  creditors  ultimately  accepted  five  cents  on  the  dollar. 


Bankruptcy  of 
Henry  S.  Ives 
&  Co.  follows 
the  collapse  of 
the  Baltimore 
&  Ohio  deal. 


1  Ives  and  Stayner  were  eventually  indicted  for  grand  larceny  in  connection  with  their  fraudulent  stock 
issues.  They  were  tried  in  September,  1889.  Despite  copious  testimony  as  to  their  guilt,  the  jury  dis¬ 
agreed,  standing  ten  for  conviction  and  two  for  acquittal.  They  spent  some  months  in  Ludlow  Street 
Jail,  having  been  arrested  on  a  civil  suit  of  the  Cincinnati,  Hamilton  &  Dayton  to  recover  $2,553,328. 
The  road  bought  and  retired  the  preferred  stock  issued  by  Ives.  Ives  died  of  tuberculosis  at  Asheville,  North 
Carolina,  in  April,  1894. 


334 


THE  NEW  YORK  STOCK  EXCHANGE 


On  September  2d  official  announcement  was  made  that  Drexel,  Morgan 
&  Co.,  Drexel  &  Co.,  and  Brown  Bros.  &  Co.,  of  America,  and  J.  S.  Morgan 
&  Co.,  Baring  Bros.  &  Co.,  and  Brown,  Shipley  &  Co.,  of  England,  had 
formed  a  syndicate  to  negotiate  five  millions  of  new  consolidated  bonds 
and  five  millions  of  new  preferred  stock  of  the  Baltimore  & 
Ohio,  and  that  the  policy  of  the  road  would  be  no  longer 
hurtful  to  trunk  line  harmony.  The  Baltimore  &  Ohio’s 
troubles  were  temporarily  ended.  In  November  Mr.  Garrett 
was  succeeded  in  the  presidency  of  the  road  by  Samuel 
Spencer.  The  syndicate  announcements  started  a  boom  in  stocks,  which 
lasted  till  checked  by  the  monetary  stringency  of  the  crop  moving  period. 

We  must  retrace  our  steps  to  recount  an  incident  which  made  June  of 
1887  a  vivacious  month.  A  Chicago  wheat  corner,  engineered  by  Maurice 


The  Baltimore  & 
Ohio’s  troubles 
ended  by  a 
Morgan  syndi¬ 
cate. 


Rosenfeld,  was  broken 
June  wheat  dropped 
74%,  amid  the  failures 
other  firms.  A  few  days 
stock  market  began  to 
Chicago  account.  Call 
15  per  cent.  On  Fri- 
a  fright- 
stock, 
had  been 
quanti- 
h  aving 
high  as  $175  a  share, 
opened  at  15614  at 
to  120,  rallied  to  130, 
three-quarters  of  an 


siffe 


Cyrus  W.  Field 
loses  heavily 
through  a  break 
in  Manhattan 
stock. 


CYRUS  WEST  FIELD. 


on  June  14th,  and 
19  cents,  closing  at 
of  Rosenfeld  &  Co.  and 
later  the  New  York 
reflect  heavy  sales  for 
money  advanced  t  o 
day,  June  24th,  came 
ful  break  in  Manhattan 
which  Cyrus  W.  Field 
carrying  in  great 
ties  for  several  years, 
bought  some  of  it  as 
On  this  Friday  it 
eleven  o’clock,  broke 
and  reacted  to  115  in 
hour.  The  entire  mar¬ 


ket  was  violently  disturbed,  and  money  jumped  to  5-16  per  cent,  for  three 
days’  use.  Manhattan  recovered  to  a  final  bid  of  135,  but  broke  on  the 
following  Monday  to  127,  money  reaching  %  per  cent,  per  diem.  On  this 
day  Messrs.  J  ay  Gould  and  Russell  Sage,  who  were  widely  credited  with 
having  sold  Manhattan  heavily  while  their  friend  Mr.  Field  was  trying  to 
support  it,  relieved  him  of  50,000  shares  of  the  stock  at  a  price  said  to 
be  $120  a  share.  Mr.  Field  was  nearly  ruined,  but  he  expressed  himself  as 
perfectly  satisfied.  Manhattan  sold  at  93%  on  August  31st. 

The  Chesapeake  &  Ohio  road  went  into  the  hands  of  receivers  in 
October,  1887,  but  was  subsequently  turned  over  to  a  new  company 
without  reorganization.  November  saw  a  fresh  advance  in  securities 
which  resulted  in  the  failure  of  A.  S.  Hatch,  former  president  of  the 
Exchange,  who  was  a  bear  on  the  market.  The  year  itself  was  one  of  good 


FRESH  BATTLES  AMONG  THE  RAILWAYS 


335 


crops  and  prosperous  trade,  but  of  decreasing  prices  for  stocks,  the  total 
sales  of  which  amounted  to  nearly  83,000,000  shares.  In  1888  the  sales 
were  only  slightly  in  excess  of  62,000,000  shares.  This  was  another  year 
of  bearish  triumph,  although  the  country  enjoyed  a  good  trade  condition 
and  crops  were  good,  a  large  decrease  in  wheat  being  offset  by  an  increase 
in  corn.  Among  railroad  stocks  Atchison,  Topeka  &  Santa  Fe  was  the 
greatest  sufferer,  selling  down  from  99%  to  53%  and  closing  at  58%— a  net 
loss  of  36  points  for  the  year  1888. 

The  result  of  the  good  railroad  earning  of  1887  had  inspired  a  burst  of 
outside  buying  in  January,  1888,  and  seats  on  the  Stock  Exchange  jumped 
in  value  from  $17,000  to  $21,000  within  a  few  weeks.  A  strike  in  the  coal 
regions  and  a  renewal  of  freight  cutting  by  some  of  the  roads  checked  the 
good  feeling.  But  Reading  common  stock  was  remarkably  strong.  It 
closed  at  36%  in  1887  and  had  advanced  to  67%  by  the  middle  of 
February,  1888.1 

Dealing  in  oil  was  in  progress  on  the  Stock  Exchange,  and  a  squeeze  in 
the  staple  took  place  on  March  6th,  the  price  running  up  fifty  cents  a  barrel. 
On  Monday,  March  12th,  the  “  ’Eighty-eight  Blizzard  ”  occurred.  The  city 
was  snow  bound.  Only  sixteen  stocks  were  dealt  in  that  day. 

The  sales  had  amounted  to  less  than  16,000  shares  when,  at  ^^12^888 
12.30  p.  m.,  it  was  decided  to  close  the  Exchange.  The 
following  day  saw  only  about  one  hundred  brokers  at  the  Board  and  the 
session  ended  at  noon.  One  member,  intrusted  with  foreign  buying  orders 
in  St.  Paul,  Erie,  and  Lake  Shore,  bid  up  the  prices  of  these  stocks,  there 
being  scarcely  any  offerings,  and  thus  awakened  the  wrath  of  certain  of  his 
fellow  brokers.  On  Wednesday  the  effects  of  the  blizzard  were  almost 
negligible  and  a  business  of  100,000  shares  was  transacted. 

The  stock  market  advanced  in  April  on  the  belief  that  the  Secretary  of 
the  Treasury  would  buy  bonds,  was  dull  in  May,  and  readily  supported  in 
June  a  default  on  the  part  of  the  Missouri,  Kansas  &  Texas  road.  Good 
crop  news  aided  prices  in  July,  and  nothing  sensational 
occurred  until  September,  when  the  Chicago,  Milwaukee  & 

St.  Paul  Railroad  passed  the  dividend  on  its  common  stock 
and  reduced  the  six  months  dividend  on  its  preferred  stock  from  three  and 
a  half  to  two  and  a  half  per  cent.,  causing  a  serious  break  in  these  issues 
and  a  decline  of  the  general  list.  It  had  been  the  practice  of  the  St.  Paul 
directors  to  anticipate  fall  earnings  in  declaring  the  September  dividends. 
The  workings  of  the  Interstate  Commerce  Law  had  so  weakened  the 
property  that  they  hesitated  in  this  instance  to  take  the  risk.1 


The  St.  Paul 
in  adversity. 


‘Austin  Corbin,  the  Reading’s  new  president,  went  abroad  in  May,  1883,  and  placed  $26,086,000 
of  new  Reading  four  per  cent,  bonds,  with  a  syndicate  including  the  Rothschilds,  Baring  Bros.  &  Co.,  J.  S. 
Morgan  &  Co.,  and  Brown,  Shipley  &  Co.  Thus  old  sis  and  seven  per  cent,  bonds  were  refunded. 


336 


THE  NEW  YORK  STOCK  EXCHANGE 


The  Sherman  Anti-Trust  bill,  forbidding  combinations  in  restraint  of 
trade,  was  reported  from  the  Senate  committee  on  finance  in  this  month. 
Its  passage  in  some  form  was  assured,  and  the  fact  did  not  help  the  market. 
But  the  prompt  payment  of  the  Rock  Island  dividend,  the  averting  of  a 
Chesapeake  &  Ohio  foreclosure,  and  the  news  of  a  large  corn  crop  at  length 
steadied  prices.  In  October  a  great  Chicago  wheat  corner,  engineered  by 
“Old  Hutch”  (Benjamin  P.  Hutchinson),  went  to  pieces  badly.1  On 
November  6th,  Mr.  Cleveland  was  defeated  for  re-election,  General  Benjamin 
Harrison  leading  the  Republican  forces  to  victory. 

The  remainder  of  the  year  was  unpleasant  for  the  bulls.  A  heavy  fall 
in  Missouri  Pacific  stock  followed  the  cutting  of  the  dividend  from  seven  to 
four  per  cent.,  the  wheat  crop  was  a  disappointment,  exports  of  merchan¬ 
dise  fell  and  those  of  gold  increased.  The  northwestern  roads  renewed 
their  rate  war  in  December.  The  Stock  Exchange  gladly  bade  the  year 
1888  farewell. 

1  Just  prior  to  this  collapse  in  wheat  Mr.  Hutchinson  had  successfully  cornered  the  September  option. 
On  the  last  day  of  September  he  forced  its  price  to  two  dollars  a  bushel  and  kept  it  there. 


XXIV 

MONETARY  DISTURBANCES 

PIERPONT  MORGAN’S  genius  for  transforming  a  chaotic 
business  situation  to  one  of  order  and  prosperity  was  illus¬ 
trated  early  in  1889  by  the  settlement  of  a  transportation 
war.  The  previous  year,  marked  as  it  was  by  a  poor  wheat 
crop,  declining  exports,  weak  iron  prices,  and  alarm  over  tariff 
agitation,  had  tended  to  sober  the  minds  of  financiers.  The 
cutting  of  railway  rates,  which  led  to  reduction  of  dividends  in  some  gases, 
had  accentuated  the  prevalent  uneasiness.  Pooling  of  freight  business  was 
forbidden  by  the  Interstate  Commerce  law,  now  in  force.  Some  other 
method  of  dealing  with  the  rate  cutting  evil  had  to  be  found.  In  January, 
1889,  Mr.  Morgan  called  together  the  most  prominent  railway  presidents. 
They  met  at  his  home  and  formed  the  “  Gentlemen’s  Agreement,”  officially 
known  as  the  Interstate  Commerce  Railway  Association,  for  the  maintenance 
of  railway  rates.  It  was  the  subject  of  cynical  remark  at  the  time,  but  it 
did  accomplish  certain  practical  results.  Eighteen  roads  were  comprised  in 
the  association.  The  reformers  soon  had  an  opportunity  to 
point  to  an  instructive  example  of  the  neglect  of  the  principles  The 
for  which  they  stood.  The  Atchison  road,  a  victim  of  rate  A^-eement  ” 8 
cutting,  passed  its  dividend  late  in  this  January.  Its  stock, 
which  had  sold  about  par  in  the  previous  year,  now  sold  at  50.  It  fell 
below  38  in  July. 

Something  of  a  bull  speculation  enlivened  the  market  in  February. 
Stock  of  the  Cincinnati,  Indianapolis,  St.  Louis  &  Chicago  road — the  “Big 
Four” — wasbought  for  the  Vanderbilt  “Bee  Line,”1  and  ranfrom  87tol06 
in  a  few  weeks,  while  “ Bee  Line”  shares  rose  from  56  to  74  simultaneously. 
The  collapse  of  an  important  French  copper  syndicate,  and  the  news  that 

1  The  “Bee  Line”  was  the  Cleveland,  Columbus,  Cincinnati  &  Indianapolis.  The  roads  which  ran 
through  Ohio,  Indiana,  and  Illinois  were  consolidated  in  a  new  company,  the  Cleveland,  Cincinnati,  Chicago 
&  St.  Louis,  with  a  bonded  debt  of  $27,000,000  and  $30,500,000  in  capital  stock. 


338 


THE  NEW  YORK  STOCK  EXCHANGE 


An  inconvenient 
ticker  dispute. 


the  Union  Pacific  would  pass  its  dividend,  checked  in  March  the  triumphs  of 
the  bulls.  From  this  time  until  May,  when  stocks  advanced  on  reports  of 
improved  railroad  earnings,  the  tendency  was  toward  depression.  On 
Friday,  May  31st,  news  of  the  terrible  loss  of  life  in  the  flood  at  Johnstown, 
Pennsylvania,  due  to  the  breaking  of  theConemaugh  Lake  dam,  reached  the 
city.  Despite  the  loss  of  property,  running  into  the  millions,  the  market  was 
firm.  A  bad  break  in  stocks  was  feared  on  Monday,  June  3d,  but  it  did  not 
come.  The  day  was  saved  by  dulness,  incident  upon  the  lack  of  a  ticker 
service.  The  rival  ticker  concerns,  the  Gold  and  Stock,  and  the 
Commercial  Telegram  Company,  both  of  whose  contracts  with 
the  Stock  Ex¬ 
change  had  just  expired, 
were  engaged  in  a  lively 
dispute,  each  endeavoring 
to  cut  the  other  out  of 
future  business.  The 
Board  excluded  them  both, 
thereby  greatly  embar¬ 
rassing  speculation.  By 
Thursday  the  dispute  was 
settled,  the  tickers  were 
restored,  and  stocks  were 
booming  under  the  leader¬ 
ship  of  the  ‘  ‘  trust  ’  ’  shares, 

White  Lead,  Sugar  Refin¬ 
eries  —  which  ran  up  and 
down  with  the  speed  of 
lightning  — American 
Cotton  Oil,  and  the  like. 

Sugar,  which  had  sold  for 
three  months  at  84,  now 
sold  at  116,  after  paying 
a  dividend  of  two  and  a  half  per  cent,  in  cash  and  another  of  eight  per  cent, 
in  scrip.  Then  it  climbed  to  123%,  this  being  the  summit  of  its  rise  in  1889. 
The  rest  of  the  year  was  a  wearisome  period  for  all  of  the  “trust”  shares, 
and  Sugar  sold  at  55  in  December. 

Railroad  shares  as  a  class  advanced  with  fair  constancy  from  early  in 
July  till  near  the  end  of  November,  aided  by  good  earnings.  The  glaring 
exception  was  the  Atchison  road,  the  stock  of  which  went  below  27  in 
October.  A  reorganization  plan  was  then  put  through,  which  avoided 
foreclosure  and  saved  the  road  from  bankruptcy. 

Addison  Cammack,  in  this  city,  and  Irving  A.  Evans  (known  as  “  Nervy  ” 


ward’s  STATUE  OF  WASHINGTON.  ERECTED  IN  1883 


MONETARY  DISTURBANCES 


339 


Evans),  in  Boston,  were  the  bears  who  were  credited  with  making  most  of 
the  profit  in  Atchison’s  fall.1  Money  rates  were  high  through  the  latter  part 
of  the  summer  and  the  fall  of  1889,  and  helped  to  bring  about  a  crash  on 
November  30th,  when  the  banks  were  calling  loans  in  preparation  for  the 
next  day’s  disbursements.  December  was  a  rather  gloomy  month,  but  the 
horizon  brightened  with  the  reflux  of  money  from  the  interior  in  January, 
traffic  earnings  increased,  and  it  began  to  look  as  if  1890  would  be  a  good 
year.  It  was  indeed  destined  to  be  auspicious  in  general  business,  although 
tight  money  was  to  make  it  one  of  trying  financial  disturbance.2 

The  “Baring  panic,”  of  November  15,  1890,  which  will  always  be 
remembered  as  the  dramatic  event  of  the  year  in  finance,  was  simply  the 
culmination  of  influences  which  for  months  had  been  undermining  values. 
In  both  Great  Britain  and  the  United  States  the  channels  of  trade  had  been 
drained  by  the  hoarding  of  money  on  the  one  hand,  and  by  its  extraor¬ 
dinary  diversion  on  the  other  into  speculative  enterprises. 

The  great  English  house  of  Baring  inherited  a  business  two  centuries 
old,  which  was  at  first  purely  mercantile  and  later  had  acquired  a  financial 
character.  In  1890  the  firm  of  Baring  Brothers  enjoyed  a  reputation  for 
solidity  and  conservatism  absolutely  without  equal  among  private  banking 
concerns.  At  the  height  of  its  power  and  fame  it  was  unwit-  _  . 

°  ±  The  Barings 

tingly  hastening  to  an  infelicitous  end.  Lord  Revelstoke,  the  attracted  to 
captain  of  this  stately  ship  of  commerce,  had  taken  aboard  a  Argentine 
strange  pilot,  and  his  vessel  was  being  headed  for  the  shoals.  enterprises. 
In  other  words,  Lord  Revelstoke  had  been  induced  by  an  eloquent  Argentine 
promoter  to  invest  heavily  in  the  securities  of  the  Argentine  Republic,  and 
of  her  little  neighbor,  Uruguay,  and  to  negotiate  millions  of  these  securities 
in  England. 

British  capitalists,  who  at  one  time  or  other  had  made  excellent  profits 
out  of  Colonial  enterprises,  proved  eager  to  entrust  their  sovereigns  with 
the  sons  of  Argentina — the  Yankees  of  South  America.  However,  the 

1  The  Atchison,  Topeka  &  Santa  Fe  ran  from  Chicago  to  Galveston,  Texas,  and  through  Santa  Fe,  New 
Mexico,  into  lower  California,  and  had  a  network  of  Texas  lines.  Light  crops  and  consequent  business 
depression  in  the  Territory  it  served,  together  with  the  construction  of  rival  lines,  had  brought  competi¬ 
tion  and  rate  cutting.  Under  the  Interstate  Commerce  law  the  Atchison  could  meet  local  competition 
only  by  a  proportionate  reduction  of  rates  throughout  its  whole  system,  and  this  was  well-nigh  equiva¬ 
lent  to  ruin. 

2  The  financial  importance  of  1890  will  render  interesting  the  following  statistical  comparison  between 

that  year  and  its  immediate  predecessor :  1890 

399,000,000  bushels 
1,489,000,000  “ 

7,750,000  bales 


Wheat  raised, 
Corn  raised, 
Cotton  raised, 
Petroleum, 

Pig  iron, 
Imports,  mdse., 
Exports,  mdse., 
Stocks  sold, 


28,604,000  bbls. 
9,000,000  tons 
$538,004,932 
$352,500,232 

56,126,365  shares 


1889. 

495,000,000  bushels 
2,040,000,000  “ 

7,250,000  bales 
21,242,742  bbls. 
8,000,000  tons 
$497,120,858 
$337,951,012 

60,823,904  shares 


The  stock  sales  do  not  include  unlisted  securities,  which  were  heavily  dealt  in  throughout  1890. 
The  price  of  pig  iron  fell  from  $20  a  ton  on  January  1,  1890,  to  $17.50  a  ton  on  January  1,  1891. 


340 


THE  NEW  YORK  STOCK  EXCHANGE 


Argentine  Republic  was  going  ahead  far  too  rapidly.  In  1890  that  country, 
with  a  population  of  less  than  4,000,000  souls,  had  piled  up  a  stupendous 
public  debt  of  $234,743,558,  almost  $60  per  capita,  to  say 
a  great  debt  nothing  of  some  $91,000,000  of  railroad  obligations  on  which 
interest  had  been  guaranteed  by  the  government.  Argentina 
was  heavily  overbuilt  with  railways. 

Argentine  securities  began  to  fall,  and  with  them  the  government  credit. 
Gold  had  risen  to  144,  when  one  of  the  Barings  visited  Argentina  in  March 
and  relieved  the  situation  by  purchasing  the  Western  Argentine  Railroad 
for  £8,000,000.  This  was  only  hastening  the  collapse  of  the  Barings. 
They  had  long  maintained  the  proud  usage  of  redeeming  at  full  value  the 
securities  which  they  had  sold  to  dissatisfied  customers,  and  which  now 
returned  to  their  counters  in  large  amounts.  As  the  year  waned  the 
house  grew  short  of  ready  money.  At  last,  in  November,  the  Barings  were 
forced  to  depend  on  their  rivals  to  protect  them  from  bankruptcy.  They 
were  saved  on  terms  which  sacrificed  their  business  and  disturbed  the 
civilized  world. 

Meanwhile  the  United  States  had  not  only  been  feeling  the  monetary 
drain  from  London,  due  to  the  exigencies  of  the  Barings,  but  had  been 
suffering  from  two  specific  ailments  which  also  induced  stringency  in  money. 
Causes  of  The  was  passage  of  the  Sherman  Silver  Purchase  act. 
disturbance  in  This  raised  the  price  of  silver,  injured  public  confidence,  and 
the  United  states,  initiated  the  hoarding  of  gold. 1  The  second  was  the  passage 
of  the  tariff  bill  fathered  by  Representative  William  McKinley,  which  became 
a  law  on  October  1, 1890.  Its  ultimate  enactment  was  regarded  as  certain 
long  before  President  Harrison  gave  it  his  signature.  Importers  rushed  to 
anticipate  it  by  bringing  in  heavy  consignments  of  foreign  merchandise  in 
time  to  escape  the  high  duties  imposed  by  the  bill.  Naturally  this  tied  up 
capital  and  strengthened  the  money  market. 

On  January  30, 1890,  the  financial  world  received  a  shock  through  the 
failure,  under  discreditable  circumstances,  of  the  Sixth  National  Bank,2 
which  in  its  fall  dragged  down  two  State  banks — the  Lenox  Hill  and 
Equitable.  About  the  same  time  the  announcement  was  made  that  the 
Union  Pacific  and  Chicago  &  North-Western  roads  had  withdrawn  from  the 
“Gentlemen’s  Agreement.”  The  stock  market  was  stagnant  for  the  next 


1  This  bill  was  signed  on  J uly  14th,  and  became  operative  a  month  later.  It  was  a  compromise  measure. 
It  repealed  the  provision  of  the  Bland  act  of  February  28, 1878,  which  required  the  monthly  purchase  and 
coinage  of  silver  to  the  value  of  between  $2,000,000  and  $4,000,000,  and  in  lieu  thereof  provided  for  the 
purchase  by  the  Secretary  of  the  Treasury  of  4,500,000  ounces  a  month,  at  a  market  price  not  to  exceed  a 
dollar  for  371%  grains.  This  silver  was  to  be  paid  for  in  legal  tender  Treasury  notes.  The  Secretary 
was  to  coin  2,000,000  ounces  of  the  metal  a  month,  until  July  1,  1891,  and  afterward  as  much  as  was 
needed  to  redeem  the  said  Treasury  notes.  The  notes  could  be  lawfully  used  for  national  bank  reserves. 

2  The  Sixth  National  Bank,  which  had  a  capital  of  $200,000,  was  located  at  Broadway  and  Thirty- 
third  Street.  Its  president,  Charles  H.  Leland,  sold  out  his  stock,  at  an  enormous  price,  to  a  syndicate 
headed  by  George  H.  Pell,  and  the  syndicate  wrecked  the  bank  a  few  days  later.  Mr.  Leland  was  adjudged 
innocent  of  direct  complicity  in  the  matter. 


MONETARY  DISTURBANCES 


341 


few  months,  save  for  some  brisk  speculation  in  Sugar,  in  which  traders 
asserted  that  the  hand  of  Henry  0.  Havemeyer  was  perceptible.  A  squeeze 
in  Reading  in  March  —  a  month  in  which  Stock  Exchange  seats  were  quoted 
at  $19,000 — was  followed  by  a  moderate  rise  in  April  and  by  a  brisk  one, 
stimulated  by  good  earning  reports,  in  May.  During  the  latter  month 
news  was  rapidly  made.  Chicago  Gas  rose  to  64  and  fell 
below  50,  while  Sugar  dropped  from  89  to  67  and  rallied  Early  market 
to  81  in  four  days.  The  Gould  party  was  ousted  from  Pacific  in  1890. 
Mail.  The  railroad  presidents  signed  a  fresh  agreement.  By 
July  traders  had  turned  from  stocks  to  silver.  The  white  metal,  aided  by 
the  new  bill,  rose  to  $1.13  an  ounce,  about  17  cents  above  the  price  in  May. 

As  autumn  approached,  money  showed  a  tendency  to  intermittent 
stringency.  London  began  to  sell  Americans  in  October,  but  our  trade  was 
good  and  prices  of  standard  stocks  held  fairly  well,  though  a  recession  of 
silver  to  103  caused  uneasiness.  Election  day,  November  4th,  resulted  in  a 
Democratic  sweep,  the  Republicans  losing  even  Pennsylvania.  The  follow¬ 
ing  day  was  characterized  by  a  sharp  break  in  the  market.  The  Bank  of 
England  gave  warning  of  impending  trouble  by  raising  its  minimum 
discount  rate  from  five  to  six  per  cent.  The  fear  of  fresh  disturbance  of  the 
tariff  situation,  which  men  had  thought  settled  by  the  McKinley  bill,  soon 
became  prevalent.  Weakness  in  stock  values  and  monetary  stringency 
characterized  the  remainder  of  the  week,  and  Saturday’s  bank  statement 
showed  a  loss  of  about  $4,000,000  in  cash.  On  Monday  morning, 
November  10th,  with  London  selling  heavily  and  local  holders  demoralized, 
the  market  seemed  drifting  into  a  panic,  when  the  sudden  Death  retards 

death  on  the  floor  of  a  member,  James  Struthers,  caused  a  tumble  in 

a  half  hour’s  suspension  of  trading.1  When  business  was  8tocks- 
resumed  men  seemed  to  have  recovered  their  self-command,  and  stocks 
rallied.  Toward  the  close,  however,  call  money  rose  to  ninety-seven  per 
cent,  and  the  market  broke  again. 

Tuesday,  November  11th,  saw  a  heavy  crash  in  “the  Villards,”  accom¬ 
panied  by  failures  on  ’Change  and  bank  embarrassments.  Henry  Villard, 
always  equipped  with  fertile  ideas  and  a  convincing  way  of  stating  them, 
had  risen  to  fresh  power  since  his  downfall  seven  years  before.  He  had 
succeeded  in  enlisting  new  German  capital  in  American  enterprises,  and 
returned,  in  1886,  to  the  Northern  Pacific  field,  which  still  inspired  his 
enthusiasm.  He  had  made  his  way  again  to  the  control  of  its  railway 
system,  and  had  held  it  against  attack.  The  Northern  Pacific  road  now  had 
outstanding  some  $37,000,000  of  preferred  stock  (on  which  three  per  cent. 

rMr.  Struthers,  a  man  of  fifty-eight  years,  was  a  specialist  in  Chicago  &  Eastern  Illinois.  He  was 
making  his  way  through  the  crowd  at  the  New  Jersey  Central  trading  post  about  noon  on  this  day,  when 
he  fell  beneath  a  stroke  of  apoplexy.  The  word  ran  about  the  floor — “Jimmy  Struthers  has  fainted.”  A 
few  moments  later  it  was  found  that  Mr.  Struthers  was  dead.  Business  was  at  once  suspended. 


342 


THE  NEW  YORK  STOCK  EXCHANGE 


was  paid  in  the  year  ending  June  30,  1890),  and  $49,000,000  of  common 
stock.  Mr.  Villard  had  also  renewed  his  hold  on  the  Oregon  &  Trans¬ 
continental  Company,  which  he  reorganized  under  the  name  of  the  North 
American  Company  in  the  summer  of  1890,  and  which  had  $40,000,000  of 
stock  and  about  $6,000,000  of  bonded  debt.  Its  assets  included  huge 
blocks  of  Northern  Pacific  common  and  preferred,  Oregon  Railway  &  Navi¬ 
gation  stock,  Oregon  Improvement  Company  stock,  and  other  securities. 
North  American  shares  were  listed  on  the  Stock  Exchange,  and  Mr. 
Yillard,  who  was  president  of  the  North  American  and  Northern  Pacific 
companies,  was  conducting  a  bull  campaign  in  their  securities.  He  wras 
absent  in  Germany  during  November,  1890,  and  his  brokers,  Decker,  Howell 
&  Co.,  were  carrying  a  heavy  line  of  his  stocks.  North  American,  which  had 
sold  above  47  a  few  months  ago,  was  now  below  27,  Northern  Pacific 
common  had  fallen  from  39)4  to  23)4,  and  the  preferred  had  dropped  from  86 
to  66 ;  and,  as  the  collateral  which  Decker,  Howell  &  Co.  could  offer  to  the 
banks  consisted  chiefly  of  these  stocks,  the  decline  had  subjected  them  to  an 
unbearable  strain.1  They  had  notified  Mr.  Villard  by  cable  on  Sunday, 
November  9th,  that  they  needed  $825,000  immediately  to  save  them  from 
going  to  the  wall.  He  had  spent  Monday  in  raising  this  money  in  Berlin, 
and  cabled  them  the  required  sum  at  the  day’s  close,  but  the  firm  now 
discovered  that  it  was  insufficient. 

At  eleven  o’clock  on  Tuesday  morning  the  failure  of  C.  M.  Whitney  & 
Co.  was  announced  on  ’Change  and  weakness  was  speedily  apparent  in  the 
market.  Traders  knew  that  even  a  larger  house  was  in  trouble.  At  2 
o’clock  the  announcement  of  the  suspension  of  Decker,  Howell 
Panic  in  “the  &  q0>  Came  over  the  ticker.  The  firm  had  assigned  to  William 
1 dayof failures.  Nelson  Cromwell,  and  its  liabilities  were  estimated  at  over 
$10,000,000.  The  high  standing  of  the  house  gave  its  failure 
a  most  depressing  effect,  and  the  gloom  was  shortly  accentuated  by  the 
news  that  three  banks  were  in  difficulties.  While  the  market  recovered 
after  the  worst  was  known  and  closed  without  heavy  net  loss  for  the  day, 
“the  Villards”  were  subject  to  great  declines.  North  American  Company, 
of  which  more  than  97,000  shares  were  sold,  fell  to  17)4  and  closed  at  17% 
bid;  Northern  Pacific  common  sold  at  16%,  cash,  and  closed  at  17%  bid, 
while  the  preferred  dropped  to  55  and  closed  at  55  bid.  Before  the  close  a 
third  failure  on  ’Change  was  announced — that  of  David  Richmond. 

The  Clearing  House  banks  convened  at  2  o’clock,  and  for  the  seventh 
time  in  their  history  decided  to  issue  Clearing  House  certificates,  on  bills 
receivable  and  other  approved  securities.  Meanwhile  a  number  of  the 
banks  combined  to  advance  money  to  three  institutions  which  needed  to 

1  Tight  money,  due  to  drains  by  London,  and  the  currency  hoarding  and  the  demand  exerted  by  active 
business  in  this  country,  had  of  course  produced  a  condition  in  which  banks  were  much  less  liberal  than 
usual  in  their  acceptance  of  collateral.  The  monetary  stringency  was  the  real  cause  of  the  fall  of  stocks. 


MONETARY  DISTURBANCES 


343 


be  helped  through  the  Clearing  House — the  Bank  of  North  America,  the 
Mechanics  and  Traders  Bank,  and  the  North  River  Bank.1  The  first  two 
were  able  to  meet  their  obligations  on  Wednesday,  but  the 
North  River  Bank,  which  had  a  capital  of  $240,000,  closed  bankrtakI°UBe 
its  doors  on  that  day,  and  there  were  two  more  failures  on  action.  Weak 
’Change.  Stocks,  however,  recovered  with  great  rapidity.  aheipingTand1 
The  leader  was  Union  Pacific,  which  had  sold  at  42%  two 
days  before  and  closed  at  48%  bid.  Mr.  Jay  Gould  and  his  associates  had 
taken  advantage  of  the  slump  to  buy  back  the  control  of  the  road.  Their 
generalship  bore  fruit  early  in  the  following  year,  when  Sidney  Dillon,  a 
Gould  man,  supplanted  Charles  Francis  Adams  in  the  presidency. 

William  Rockefeller  and  four  others  were  appointed  a  committee  by  the 
creditors  of  the  North  American  Company  to  devise  a  means  of  keeping  its 
assets  from  being  thrown  suddenly  on  the  market.  Despite  this  precaution 
its  stock  fell  to  $7  a  share  on  Thursday.  It  then  recovered  four  points. 
Friday  was  a  day  of  heavy  tendencies.  On  Saturday,  November  15th, 
London  prices  came  one  to  three  points  higher.  Not  long  after  the  opening 
the  New  York  market  was  stunned  by  the  news  that  the  great  English 
house  of  Baring  Brothers  was  going  into  forced  liquidation. 

The  South  American  speculations  fathered  by  Lord  Revelstoke  had  at 
length  done  their  work.  To  prevent  the  failure  of  Baring  Brothers  it 
had  been  found  necessary  to  form  a  syndicate,  headed  by  the  TheBaringpanic 
Bank  of  England,  to  guarantee  the  acceptances  of  the  firm 
falling  due  this  day.  The  syndicate  included  several  important  rivals  of  the 
great  house.  The  terms  upon  which  their  aid  was  conditioned  involved  the 
liquidation  of  the  assets  of  Baring  Brothers  within  a  given  time,  and 
the  rival  bankers  fell  heirs  to  the  business  of  the  firm.  Its  liabilities  were 
stated  to  be  £21,000,000,  of  which  acceptances  accounted  for  £16,000,000, 
while  its  assets  were  reckoned  at  £24,000,000.  The  fund  subscribed  by 
the  syndicate  of  guarantors  was  £10,000,000.  The  underlying  causes  of 
the  trouble  have  already  been  detailed.  It  was  precipitated  by  the  action 
of  the  Russian  Government,  which,  taking  alarm  at  the  fall  in  Argentine 
securities,  had  suddenly  withdrawn  £2,500,000  of  deposits  from  the  vaults 
of  Baring  Brothers  and  transferred  the  money  to  Berlin. 

Stocks  fell  violently  upon  the  receipt  of  the  ill  news  from  London,  many 
issues  reaching  the  lowest  prices  of  the  year  on  this  unhappy  Saturday 
morning.  Atchison  was  the  weakest  of  the  list,  dropping  about  five  points, 

1  The  Bank  of  North  America  had  overcertified  the  checks  of  Decker,  Howell  &  Co.  to  the  amount  of 
$900,000,  and  lacked  that  sum  to  make  its  balances  good.  It  was  contributed  by  nine  banks,  each  of 
which  advanced  $100,000  to  the  Bank  of  North  America  over  night.  The  Clearing  House  banks  also  lent 
$199,000  to  the  Mechanics  and  Traders  Bank.  They  advanced  to  the  North  River  Bank  $119,000,  of 
which  $59,000  was  repaid  later  in  the  day,  but  this  institution  was  unable  to  furnish  the  remaining 
$60,000  on  Wednesday  .  .  .  The  Clearing  House  certificates  were  issued  between  November  12th  and 
December  22, 1890,  the  last  one  being  called  in  and  cancelled  on  February  7, 1891. 


344 


THE  NEW  YORK  STOCK  EXCHANGE 


to  23%,  and  then  rallying  2 This  stock  was  made  a  target  because  Kid¬ 
der,  Peabody  &  Co.,  the  American  agents  of  the  Barings,  were  identified 
with  it.  The  New  York  house  was  perfectly  sound.  Toward  the  close  the 
market,  having  wiped  out  a  host  of  speculators,  rallied  as  quickly  as  it  had 
fallen.  The  day’s  trading  aggregated  about  385,000  shares. 

Three  New  York  failures  occurred  on  the  following  Monday  and  two  on 
Tuesday  without  seriously  affecting  a  market  which  had  sustained  a  drastic 
purging.  On  Wednesday,  November  19th,  Jay  Gould  and  Russell  Sage, 
having  bought  control  of  the  Pacific  Mail  Steamship  Company  in  the  course 
of  the  panic,  entered  its  directorate,  and  George  J.  Gould  was  elected 
president.  On  the  following  day  the  prominent  Philadelphia  bankers, 
Barker  Bros.  &  Co.,  failed  with  upward  of  $6,000,000  in  liabilities,  but  the 
New  York  market  was  nowise  affected.  Friday,  which  saw  the  United 
States  Rolling  Stock  Company  forced  into  a  receiver’s  hands  by  the  mone¬ 
tary  stringency,  also  saw  a  genuine  bear  panic  in  stocks.  The  death  of 
August  Belmont,  on  November  24th,  created  no  excitement,  while  only  a 
slight  recession  accompanied  the  announcement  on  the  following  day  that 
the  Oregon  Improvement  Company  had  applied  for  a  receiver.  Fresh  weak¬ 
ness  prevailed  early  in  December,  however,  as  several  mercantile  concerns 
went  to  the  wall  under  the  influence  of  tight  money,  which  interfered  with 
collections.  A  recovery  and  a  show  of  strength  at  the  close  ended  the  year. 


§(!|§|j?ENERALLY  speaking,  1891  was  characterized  by  advancing  values, 
good  crops,  and  good  business,  while  bulls  and  bears  divided  honors 
in  the  following  year.  Yet  all  the  while  the  pernicious  Sherman  Silver 
Purchase  law  of  1890,  which  had  supplanted  the  inflation  of  the  Bland  act 
of  1878  with  another  kind  of  inflation  almost  as  bad,  was  undermining  confi- 

1  The  following  table  will  be  of  interest  as  indicating  the  extent  of  the  slump  of  1890.  The  columns 
give,  in  their  respective  order,  the  high  prices  made  earlier  in  the  year,  the  final  bids  on  the  Monday  before 
election,  the  final  bids  on  Monday,  November  10th,  those  on  the  day  following,  when  the  Villard  break 
occurred,  and  the  low  prices  and  final  bids  on  November  15th,  the  day  of  the  Baring  panic. 


Stocks. 

High  Prices. 

Nov.  3. 

Nov.  10. 

Nov.  11.,,  ^OTl  . 

(low  prices) 

Nov.  15 
(final  bit 

Atchison, . 

.  .  50% 

33% 

27% 

27% 

23% 

25% 

C.,  M.  &  St.  Paul, 

.  .  79% 

56% 

44% 

45% 

44 

46% 

C.,  R.  I.  &  Pac.,  .... 

.  ■  98% 

76 

67% 

67% 

63% 

65 

D.,  L.  &W.,  .... 

.  .  149% 

143% 

134% 

135% 

123% 

127% 

Louis.  &  Nash.,  .... 

.  .  92% 

76% 

69 

71% 

66 

69% 

Mo.  Pac., . 

.  .  79% 

68% 

62 

62% 

59% 

61 

N.  Y.  Cent.,  .... 

.  Ill 

100% 

96 

96% 

97 

97% 

North  Amer.,  .... 

•  •  47% 

34% 

26% 

17% 

10 

10% 

No.  Pac.  com.,  .... 

.  .  39% 

28% 

23% 

17% 

18% 

19% 

No.  Pac.  pfd., 

86 

72% 

66% 

55 

57% 

57% 

Pac.  Mail, . 

•  •  47% 

41% 

35 

35 

30% 

32 

Phil.  &  Read.,  .... 

■  ■  48% 

34% 

28% 

29% 

28 

29% 

Union  Pac.,  .... 

.  .  68% 

47 

43% 

44% 

43 

45% 

West.  Un.,  .... 

.  87 

81% 

76 

75% 

74% 

76 

Later  in  the  year  several  of 

the  stocks  made  new  low  figures.  Louisville 

&  Nashville  sold  at  65 

Missouri  Pacific  at  56,  and  Union  Pacific  at  42%,  and  there  were  other  instances  of  the  kind. 

MONETARY  DISTURBANCES 


345 


dence  and  preparing  the  way  for  the  trouble  of  1893.  Equally  important  at 
this  time  were  the  formation  of  industrial  trusts  and  the  speculation  in 
their  grossly  watered  securities.  The  Anti-Trust  act  had  been 
in  force  since  1888,  but  its  actual  accomplishments  in  pre-  ^nndet™g°tf  trust8 
venting  the  restraint  of  trade  were  small.  The  establishment  speculation, 
of  such  a  complete  monopoly  as  the  Standard  Oil  Company 
necessarily  meant  opportunity  for  great  profits.  The  ambition  and  force  of 
the  men  controlling  this  corporation  swept  all  competition  aside  and,  by 
giving  them  a  clear  field,  gave  them  fortunes.  Yet  when  they  had  built  up 
their  enormously  lucrative  business  they  were  shrewd  enough  to  conserve  it 
by  lowering  the  price  of  oil.  The  commodity  was  thus  put  within  the  range 
of  world-wide  consumption,  the  business  of  the  Standard  Oil  Company  grew 
by  leaps  and  bounds,  and  John  D.  Rockefeller,  once  a  grocer’s  clerk,  became 
the  wealthiest  of  living  investors  and  the  patron  of  religion  and  education. 

But  the  great  majority  of  the  so-called  trusts  which  arose  in  the 
eighties  and  nineties  adopted  a  far  different  policy.  They  aimed  to  raise 
prices  artificially.  Their  promoters  had  not  the  boldness  to  choke  off  com¬ 
petition  by  arson,  bribery,  highway  robbery,  or  the  like.  They  endeavored 
to  stifle  it  simply  by  combining  all  possible  rivals  in  one 
corporation,  and  then,  instead  of  using  the  economies  obtain-  The  weak  Point 
able  by  consolidation  to  lower  prices  and  thus  broaden  their  combinations, 
markets,  they  endeavored  to  raise  prices  to  artificial  levels 
and  keep  them  there.  Doubtless  the  effort  was  a  result  of  the  issuance  of 
watered  stock,  designed  to  sell  at  great  profit  to  investors,  for  the  managers 
of  the  corporations  saw  no  way  to  pay  dividends  on  inflated  capital  save 
by  charging  inflated  prices.  At  all  events  the  effect  of  the  high  prices  was 
to  encourage  the  very  thing  the  trusts  were  formed  to  eradicate — competi¬ 
tion.1  New  rivals  sprang  up  to  undersell  the  would-be  monopolists. 
Dividends  on  watered  stock  became  no  longer  possible,  and  one  trust  after 
another  went  to  the  wall.  The  Standard  Oil  Company  crushed  its  antago¬ 
nists.  The  average  trust  distressed  its  own  shareholders. 

It  took,  of  course,  several  years  for  the  full  effects  of  the  industrial 
combinations  to  become  visible.  The  trust  movement  was  pronounced  in  the 
late  eighties.  The  formation  of  the  “  Whiskey  Trust  ”  under  the  title  of  the 
Distillers  &  Cattle  Feeding  Company,  with  four  times  as  much  stock  as 
represented  the  legitimate  value  of  the  combined  plants,  set  a  bad  example 

1  Andrew  Carnegie,  in  an  interview  in  the  New  York  Times,  published  October  9,  1888,  after  denying 
that  a  combination  existed  in  steel  rails,  had  this  to  say :  “  The  truest  words  that  can  be  said  about  trusts 
are  that  no  one  has  much  cause  to  fear  trusts  except  him  that  goes  into  them.  There  is 
no  possibility  of  maintaining  a  trust.  It  is  bound  to  go  to  pieces  sooner  or  later  and  Views  of  Mr. 
generally  to  involve  in  ruin  those  foolish  enough  to  embark  in  it.  If  it  is  successful  for  a  carneffje  on  the 
time  and  undue  profits  accrue,  competition  is  courted  which  must  be  bought  out,  and  ®  . 

this  leads  to  fresh  competition.  And  so  on  until  the  bubble  bursts.  And  the  article  trust  question, 
which  it  was  proposed  for  years  to  enhance  in  price  is  made  for  years  without  profit,  and 
the  consumer  has  his  ample  revenge.  When  you  find  me  trying  to  organize  a  steel  rail  trust,  set  it  down 
that  softening  of  the  brain  has  begun.” 


346 


THE  NEW  YORK  STOCK  EXCHANGE 


in  1887.  The  Cottonseed  Oil  Trust  had  preceded  it,  and  it  was  followed  by 
many  other  combinations.  Before  the  close  of  1888  they  attempted  to 
monopolize  beer,  bluestone,  chemicals,  clay  sewer  pipe,  coke,  copper,  fruit, 
gas,  guns,  hides,  jute,  lead,  linseed  oil,  lumber,  matches,  nails, 
Multiplication  of  paper  peanuts,  rice,  rubber,  salt,  sashes  and  blinds,  school 
binations.  slates,  silk,  soap,  sorghum,  spool  thread,  steel  rails,  storage 
warehouses  in  Brooklyn,  and  sugar.  New  implements  of 
speculation  were  furnished  by  the  securities  of  industrial  companies.  The 
speculation  became  excessive  and  tended  to  alarm  conservative  men.  They 
were  further  disturbed  by  the  efficacy  of  the  Sherman  law  in  depleting  the 
Treasury  reserve  and  by  the  strenuous  efforts  of  free  coinage  adherents  in 
Congress  to  throw  this  country  upon  a  silver  basis. 

The  United  States  raised  650,000,000  bushels  of  wheat,  2,075,000,000 
bushels  of  corn,  and  8,250,000  bales  of  cotton  in  1891,  and  produced 
40,000,000  tons  of  anthracite.  With  these  sound  bases  to  work  upon, 
general  business  was  good,  though  foreign  commerce  was  restricted,  both 
imports  and  exports  falling  below  those  of  the  year  next  preceding,  while 
the  balance  of  trade  remained  against  the  country.  Improved  conditions 
stimulated  and  increased  Stock  Exchange  business.  The  formation  in 
January  of  the  Western  Traffic  Association,  headed  by  President  Roswell 
Miller  of  the  St.  Paul  road,  helped  the  market.  Hard  times  in  the  West, 
prevalent  by  reason  of  the  crop  failures  of  1890,  failed  to  depress  securities, 
which  also  resisted  the  efforts  of  silver  men  to  get  a  free  coinage  bill  enacted 
and  of  Nebraska  legislators  to  pass  measures  limiting  freight  rates. 
Favorable  American  crop  reports  and  news  of  foreign  crop  failures  started 
a  good  rise  in  April.  Speculation  grew  fairly  brisk,  and  was  characterized 
by  erratic  movements  in  the  industrials.  In  May,  1891,  began  the  outflow 
of  gold  which  was  necessary  to  pay  for  our  heavy  importations  of  the 
previous  year.  It  was  drifting  toward  Russia,  which  was  then  accumu¬ 
lating  metal  for  the  purpose  of  loan  repayments.  The  efflux  unsettled  the 
situation  and  checked  the  rise.  By  July  the  silver  question  was  already 
beginning  to  awaken  apprehension,  and  satisfactory  crop  reports  met 
no  further  response.  In  August  and  September,  however,  the  market 
improved  again.  Gold  began  to  return.  Russian  peasants  were  starving 
in  consequence  of  poor  crops  and  setting  fire  to  their  houses  to  get  into 
jail,  but  American  farmers  wrere  prosperous.  The  splendid  corn  crop 
brought  disaster  to  Mr.  S.  Y.  White,  who  ended  a  bold  opera¬ 
tion  in  corn  by  announcing  his  suspension  on  September  22d. 
He  was  said  to  be  carrying  between  10,000,000  and  12,000,- 
000  bushels  of  the  staple,  which  had  fallen  seventeen  cents 
in  three  weeks.  Mr.  White  eventually  got  upon  his  feet  again,  made  a  new 
fortune,  and  paid  off  his  debts. 


Mr.  White  a 
loser  in  the 
corn  market. 


MONETARY  DISTURBANCES 


347 


The  passing  of  the  Missouri  Pacific  quarterly  dividend  on  September 
24th  caused  a  ten-point  break  in  the  stock,  carrying  it  to  65,  and  depressed 
the  whole  market.  Prices  rallied  early  in  October,  however,  and  sustained 
with  composure  the  bad  failure  of  a  prominent  Boston  house,  Irving  A. 
Evans  &  Co.,  and  the  subsequent  downfall  of  the  Maverick  National  Bank 
of  Boston,  incidents  both  highly  flavored  with  scandal.1  On  November  3d 
the  Democrats  swept  New  York,  Roswell  P.  Flower  defeating  J.  Sloat 
Fassett  for  Governor,  and  shortly  aftemard  the  market  yielded  to  a  bear 
raid  but  recovered  sharply.  The  year  ended  in  a  bull  triumph  tempered  by 
two  adverse  circumstances,  a  Stock  Exchange  failure  and  the  attempt  of  a 
dynamiter  on  Russell  Sage’s  life.  The  failure,  which  occurred  on  November 
27th,  was  that  of  Field,  Wiechers,  Bindley  &  Co.  The  head  of 
this  firm,  Edward  M.  Field,  had  become  deranged  and  his  firm  Unhappy  failure 
had  indulged  in  hypothecation  of  securities  in  its  care,  a  fact  Fiel“,,g  80n ' 
which  gave  the  failure  an  ugly  look.  Mr.  Field  was  committed 
to  an  asylum.  His  father,  Cyrus  West  Field,  the  originator  of  the  Atlantic 
cable,  received  a  fatal  blow  in  this  disaster,  and  died  in  the  following  July. 

On  December  4,  1891,  Russell  Sage’s  office,  in  the  old  Arcade  Building, 
was  entered  by  Henry  L.  Norcross,  a  young  man  presumably  insane,  who 
demanded  a  huge  sum,  and  upon  Mr.  Sage’s  refusal  exploded  a  dynamite 
bomb,  killing  himself  and  wounding  other  persons.  William  R.  Laidlawr,  a 
clerk  wTho  chanced  to  be  in  the  office,  acted  as  a  human  shield  for  Mr.  Sage, 
and  eventually  sued  him  for  damages  without  success.  Mr. 

Sage  was  only  slightly  injured  by  the  force  of  the  explosion.  Russell  Sage 
The  excitement  caused  by  the  episode  had  an  evanescent  effect. 

Bear  raiding  of  the  market  and  an  erratic  performance  in 
Whiskey  Trust  shares  characterized  the  first  month  of  1892,  and  in  Feb¬ 
ruary  the  coalers  experienced  a  general  rise.  It  preceded  the  most 
important  announcement  of  the  year — that  of  the  McLeod  anthracite 
combination.  Archibald  Angus  McLeod  was  the  president  of  the  Philadel¬ 
phia  &  Reading  Railroad.  A  few  years  previous  he  was  the  manager  of  a 
little  New  York  State  railroad  owned  by  Austin  Corbin.  Mr.  Corbin  had 
brought  him  to  the  Reading  system,  and  his  display  of  energy  and  capacity 
ultimately  made  him  Mr.  Corbin’s  successor  as  president  of  the  road.  His 
administration  was  apparently  most  prosperous.  He  had  gained  powerful 
friends,  chief  among  them  Mr.  J.  Pierpont  Morgan,  and  led  a  clique  of 
intimates  whose  faith  in  him  was  such  that  he  seemingly  induced  them  to 


attacked  by 
a  dynamiter. 


1  Irving  A.  Evans,  widely  known  as  “Nervy”  Evans,  was  Boston's  most  prominent  operator.  He 
ruined  his  firm  by  injudicious  speculations,  and  killed  himself  on  October  16th,  at  Allenstown,  New  Hampshire. 
The  Maverick  National  Bank,  which  had  a  capital  of  $400,000,  closed  its  doors  fifteen  days  later.  Its 
president,  Asa  P.  Potter,  was  a  friend  of  Mr.  Evans,  and  was  accused  of  having  involved  the  bank  in  the 
latter’s  ventures.  He  was  arrested,  indicted  on  a  charge  of  false  certification,  bogus  entries,  and  other 
violations  of  law,  and  was  convicted  in  February,  1893.  He  obtained  a  new  trial  and  was  acquitted  in 
the  following  September. 


348 


THE  NEW  YORK  STOCK  EXCHANGE 


invest  their  means  at  liis  discretion.  Among  his  bright  ideas  was  a  project 
to  enhance  the  price  of  coal  by  monopoly.  He  succeeded  with  Mr.  Morgan’s 
aid  in  negotiating  a  lease  to  the  Reading  of  the  Lehigh  Valley  and  New 
Announcement  JerseY  Central  roads.  While  his  plans  were  being  carried  out 
of  the  McLeod  the  coalers  boomed.  Reading,  which  sold  about  40  w'hen 
anthracite  February  began,  ran  from  57%  to  65  on  February  11th,  the 

day  the  great  scheme  was  announced,  and  trading  in  the  issue 
on  this  occasion  exceeded  530,000  shares  in  volume.  The  new  combination 
included  an  arrangement  by  which  the  Reading  interests  were  enabled  to 
manage  the  coal  business  of  the  Delaware,  Lackawanna  &  Western  Railroad. 
It  was  estimated  that  the  monopoly  controlled  about  eighty-five  per  cent, 
of  the  country’s  total  anthracite  production.  A  lease  arrangement  enabled 
Mr.  McLeod  to  escape  the  hand  of  the  Interstate  Commerce  law.  But 
public  opinion  was  aroused  by  his  plan  to  advance  the  price  of  coal,  and  the 
New  Jersey  State  authorities  took  action  against  the  New  Jersey  Central. 
In  August  it  was  forced  to  cancel  its  lease  to  the  Reading,  and  withdrew 
from  the  combination.  Meanwhile  Mr.  McLeod  was  laying  fresh  schemes 
for  the  Reading  and  preparing  to  run  it  into  its  third  bankruptcy. 

Late  in  February  there  began  an  outflow  of  American  gold  which 
became  the  prominent  financial  feature  of  the  year  and  threw  a  damper  on 
all  speculation  for  the  rise.  There  were  sporadic  jumps  in  industrials, 
National  Cordage  stock  being  a  leader,  but  little  in  the  way  of  a  steady 
bull  movement  took  place  in  1892.  Money  was  a  glut  in  the  market,  through 
Gold  exports  plentiful  supply  of  Treasury  notes  which  the  Sherman 

indicate  Europe’s  Silver  law  ground  out  each  month.  Silver  bullion  fell  in  April 
distrust  of  to  85  cents  an  ounce.  Every  succeeding  week  increased  the 

A  merica 

public  apprehension  that  these  notes,  which  had  nothing 
behind  them  save  the  Government  credit  and  depreciated  silver,  could 
not  be  sustained  on  a  parity  with  gold.  The  great  exports  of  the  last 
named  metal  throughout  the  year  were  not  susceptible  of  explanation  by 
the  movement  of  trade.  They  were  largely  due  to  European  sales  of 
American  securities,  inspired  by  distrust  of  our  finances.  While  Europe 
was  throwing  over  our  stocks  American  statesmen  were  endeavoring  to 
justify  her  course.  The  free  silver  party  was  fighting  hard  in  Congress,  and 
on  July  1,  1892,  a  bill  providing  for  the  absolute  free  coinage  of  silver 
passed  the  Senate,  aided  by  the  vote  of  Senator  David  B.  Hill  of  this  State. 
The  measure  was  killed  in  the  house,  but  the  growing  strength  of  the  silver 
party  excited  just  alarm. 

However,  the  market  was  moderately  firm  throughout  the  summer, 
though  financiers  were  anxious,  the  iron  trade  was  depressed,  and  the  low 
price  of  cotton  was  making  times  hard  for  the  South.  A  heavy  speculation 
in  New  York  &  New  England  Railroad  stock  came  in  September.  October 


MONETARY  DISTURBANCES 


349 


Death  of 
Jay  Gould. 


was  distinguished  by  tighter  money,  incident  to  the  crop-moving  period,  by 
a  crash  in  Whiskey  Trust  shares,  and  the  virtual  break  up  of  the  Western 
Traffic  Association.  On  November  8th  the  people  expressed 
their  dissatisfaction  with  prevailing  conditions  by  returning  rJer^^Ieveland 
the  Democratic  party  to  power.  President  Harrison  was  president, 
defeated  for  re-election  by  former  President  Cleveland.  The 
market  was  rather  soft  on  the  following  day,  weakness  being  most  apparent 
in  the  industrials.  Later  in  the  month  gold  exports  were  resumed  and  the 
bears  gained  still  more  control  of  the  situation. 

On  Friday  morning,  December  2,  1892,  Jay  Gould  died.  The  public 
had  known  that  he  was  ill,  but  his  death  was  a  surprise.  Mr.  Gould  was  a 
victim  of  phthisis.  He  had  been  going  down  hill  for  many 
months,  though  the  fact  was  hardly  realized.  A  severe  cold 
which  he  contracted  while  taking  a  ride  on  the  day  before 
Thanksgiving  had  produced  a  hemorrhage,  and  brought  his  remarkable  life 
quickly  to  an  end.  He  left  a  fortune  estimated  at  between  $70,000,000 
and  $100, 000, 000, 1  only  a  small  portion  of  which  he  had  ever  been  able 
to  enjoy.  His  death  removed  its  greatest  actor  from  the  New  World’s 
financial  stage,  but  resulted  in  no  shock  to  public  confidence.  In  the  week 
ending  December  11th  the  Gould  stocks  were  strong,  a  gain  of  2%  points 
being  credited  to  Missouri  Pacific,  one  of  5%  points  to  Manhattan,  and  one 
of  5%  points  to  Western  Union.  Manhattan,  which  sold  at  138  on  the  day 
after  Mr.  Gould’s  death,  closed  that  year  at  155%. 

The  general  market  was  rather  weak  during  the  remainder  of  December, 
with  sharp  breaks  in  Chicago  Gas  and  Whiskey  Trust  shares.  Rumors 
affecting  the  credit  of  Reading  exerted  a  depressing  influence.  The  Street 
seemed  to  apprehend  that  Mr.  McLeod  was  coming  to  the  end  of  his  career. 
Perhaps,  also,  it  had  some  vague  foreknowledge  of  more  serious  trouble  in 
store. 

1  The  official  appraisal  of  the  Jay  Gould  estate,  made  for  the  purpose  of  the  inheritance  tax,  was 
$72,000,000. 


XXY 

THE  THREAT  OF  UNSOUND  CURRENCY 

EW  intelligent  and  dispassionate  observers  of  public  affairs  in 
America  will  dissent  from  the  statement  that  our  currency 
system  is  reasonably  sound  to-day  and — politics  apart — free 
from  the  menace  of  serious  disturbance.  The  records  of 
finance  show  us  that,  from  a  time  antedating  the  birth  of 
the  Nation  till  the  close  of  the  Presidential  campaign  in 
1896,  our  people  had  one  long  struggle  to  establish  and  preserve  a  sensible, 
adaptable  currency.  Periods  of  truce  alternated  with  periods  of  bitter  con¬ 
test.  To-day,  the  money  system,  if  short  of  perfection,  is  in  good  working 
order.  It  may  permit  of  too  violent  fluctuation  in  interest  rates,  but  it  is 
not  easily  made  a  vehicle  of  panic.  Those  who  would  make  it  such  were 
taught  a  lesson  that  should  serve  for  at  least  one  generation. 

During  the  period  now  to  be  considered  the  champions  of  inflation  made 
an  open  and  alarming  campaign.  They  enjoyed  a  temporary  and  malign  suc¬ 
cess  while  the  Sherman  Silver  Purchase  act  of  1890  remained  operative. 
When  Mr.  Cleveland  killed  this  measure  they  began  to  lay  plans  industri¬ 
ously  for  the  enactment  of  a  far  worse  law.  Whether  they  were  winning 
partial  triumphs  or  threatening  to  win  complete  ones,  the  effect  on  the 
business  world  was  the  same  —  distrust,  at  home  and  abroad,  of  our  cur¬ 
rency  crippled  trade ;  gold  left  our  shores  in  an  almost  steady  stream,  and 
the  vision  of  National  insolvency  hovered  in  the  minds  of  half  our  people. 

Here  lay  the  chief  cause  of  the  panic  of  1893, 1  although  it  was  due  in 

1  Deficiency  in  the  crops  may  be  thought  to  have  played  a  part  in  the  depression  of  1893.  While  1892 
was  an  indifferent  crop  year,  1893  was  a  decidedly  poor  one.  The  following  table,  showing  the  production 
of  wheat,  corn,  cotton  and  oats  in  both  years,  will  be  of  interest 

Wheat.  Corn.  Cotton.  Oats. 

1892,  515,949,000  bushels  1,628,464,000  bushels  6,700,365  bales  661,035,000  bushels 

1893,  396,131,725  “  1,619,496,000  “  7,549,817  “  638,854,850  “ 

In  connection  with  these  figures  it  should  be  remembered  that  the  panic  of  1893  was  well  advanced 
before  the  crop  prospects  for  the  year  could  be  definitely  realized. 


THE  THREAT  OF  UNSOUND  CURRENCY 


351 


some  measure  also  to  “trust  methods  ”  and  their  accompanying  evils — the 
overcapitalization  and  foolish  management  of  industrial  companies,  and 
overspeculation  in  their  shares.  Inasmuch  as  this  disturbance  came  on 
while  one  political  party  was  yielding  the  reins  of  power  to 
another,  and  while  the  people  were  expecting  a  change  in  £^^0^1893 
tariff  systems,  uneasiness  concerning  the  possible  effects  of 
such  a  change  intensified  the  trouble. 

If  we  regard  currency  as  the  life  blood  of  trade,  and  remember  that  vary¬ 
ing  degrees  of  illness  are  produced  by  blood  disorders,  we  get  a  clear  idea  of 
the  main  cause  of  the  panic.  When  the  Bland  act  was  passed  in  1878  the 
country  began  the  regular  purchase  of  $2,000,000  worth  of  silver  a 
month  and  its  conversion  into  American  dollars.  Each  of  these  dollars 
was  worth  less  than  its  face  value  and  was  made  acceptable  at  that  value 
by  the  utilization  of  the  government’s  credit.  With  every  succeeding  month 
the  strain  upon  that  credit  grew  and  the  difference  between  the  volume  of 
money  needful  for  trade  and  the  volume  of  money  authorized  was  widened. 
These  dollars  began  to  pile  up  in  the  Treasury  vaults.  The  people  thought 
them  good  things  with  which  to  pay  taxes. 

For  more  than  twelve  years  this  process  continued.  Then  something 
worse  was  substituted  for  it.  The  Sherman  Silver  Purchase  act  of  1890 
compelled  the  purchase  of  a  great  amount  of  the  white  metal — about  140 
tons  a  month  — and  the  issuance  in  payment  therefor,  after  July  1,  1891, 1 
of  Treasury  notes.  These  notes  as  well  as  the  greenbacks  (of 
which  some  $346,000,000  were  in  circulation)  were  redeem¬ 
able  in  coin.  The  Government  very  properly  interpreted  ‘  ‘  coin  ” 
to  mean  “gold,”  being  bound  by  law  to  maintain  the  parity  of  the  metals 
on  the  established  basis  of  sixteen  to  one.  It  therefore  had  outstanding  an 
immense  and  continually  growing  volume  of  paper  liabilities,  and  for  their 
redemption  held  a  stock  of  gold,  already  far  too  small  and  constantly 
diminishing.  When  a  Treasury  note  was  redeemed,  the  Government,  instead 
of  cancelling  it,  was  forced  to  reissue  it,  in  consequence  of  which  the  same 
note  might  be  redeemed  in  gold  many  times.  Thus  was  formed  the  “  endless 
chain  ”  which  drained  the  Treasury  of  its  stock  of  the  precious  metal. 

Under  these  conditions  gold  exports  became  alarmingly  large  in  the 
Summer  of  1892,  despite  the  fact  that  the  trade  balance  was  substantially 
in  our  favor.  Europe,  which  for  years  had  supplied  us  with  working  capital 
by  purchasing  our  securities,  was  now  withdrawing  it,  and  we  were  obliged 
to  ship  gold  to  buy  back  those  securities  as  they  returned  to  our  market. 
The  action  was  analogous  to  that  of  a  bank  which,  having  advanced 
funds  on  the  shares  of  a  corporation,  finds  that  it  is  hazardously  managed 


Effect  of  the 
Sherman  act. 


1  Between  the  date  when  the  Sherman  act  became  operative  and  July  1,  1891,  the  Secretary  of  the 
Treasury  issued  no  notes  for  payment  of  the  silver  purchased,  but  coined  2,000,000  ounces  of  it  every  month. 


352 


THE  NEW  YORK  STOCK  EXCHANGE 


and  calls  the  loans.  Europe  feared  that  the  Sherman  act  would  eventually 
force  us  to  a  silver  currency  basis,  which  would  mean  the  payment  of  all 
our  obligations  in  dollars  worth  about  sixty  cents  apiece.  Early  in  1893 
the  spectacle  of  gold  flowing  steadily  to  Europe  produced  a  grave  distrust 
at  home.  A  great  part  of  this  gold  was  taken  for  shipment 
from  the  Treasury  vaults.  While  the  reserve  diminished  indi- 


Europe 
distrustful  of 
our  financial 
soundness. 


viduals  began  to  hoard  their  funds.  Credit  contracted  as  the 


feeling  of  disquietude  spread,  and  the  resultant  injury  to 
business  at  length  reached  the  extent  of  a  commercial  panic. 

Coincidently  the  large  industrial  corporations  discovered  that  it  is  one 
thing  to  water  stock  and  quite  another  to  pay  dividends  on  it.  The  system 
of  overcapitalizing  industry  to  fatten  promoters’  purses,  throttling  com¬ 
petition  and  artificially  raising  prices,  broke  down.  This  result  was 
hastened  by  the  monetary  stringency  which  our  defective  currency  brought 
on.  But  it  was  due  sooner  or  later,  irrespective  of  the  Sherman  act. 

Wall  Street  usually  is  ahead  of  the  country  in  detecting  a  change  in 
business  conditions.  It  discounts  the  coming  of  adversity  as  easily  as  a 
return  of  good  times.  Early  in  1893  the  decline  of  security  prices  gave 
warning  of  coming  misfortune.  The  Philadelphia  &  Reading  collapse  was  the 
first  of  a  calamitous  series  of  bear  triumphs  which  came  to  an  end  on  the 
last  day  of  July.  Mr.  A.  A.  McLeod,  president  of  the  Reading  road— which 
had  been  reorganized  in  1887 — was  currently  believed  to  have  won  a  per¬ 
manent  prosperity  by  the  touch  of  veritable  genius.  Through  leases  of  the 
Central  Railroad  of  New  Jersey  and  the  Lehigh  Valley  he  had  obtained  an 
outlet  for  his  system  to  New  York,  and  by  his  anthracite  combination  of 
1892  had  secured  a  commanding  and  presumably  advantageous  position 
in  the  hard  coal  carrying  trade.  Meanwhile  he  was  assuming  large  new 
commitments  in  order  to  extend  the  sphere  of  Reading’s 
McLeod’s  influence  through  New  England.  McLeod  and  his  friends  were 
projects18  *n  buying  up  the  control  of  the  New  York  &  New 
England  Railroad.1  The  shares  of  that  property  were  being 
carried  on  borrowed  money.  The  Reading  road  itself  was  a  heavier  bor¬ 
rower  of  funds  with  which  to  carry  on  its  coal  business.  Its  obligations 
apparently  were  based  on  the  assumption  that  profits  never  would  fall  off. 
As  earnings  decreased  and  the  growing  difficulties  of  the  money  market 
made  the  property’s  floating  debt  hard  to  provide  for,  its  stock  began  to 


'New  York  &  New  England  stock  was  a  favorite  specnlative  football.  For  years  it  used  to  advance 
sharply  before  each  annual  election,  on  rumors  of  “buying  for  control.”  The  road,  which  was  a  reorgan¬ 
ization  of  the  Boston,  Hartford  &  Erie,  ran  between  Boston,  Massachusetts,  and  Hopewell  Junction,  New 
York,  with  branches  through  Connecticut  and  Rhode  Island,  about  538  miles  being  comprised  in  the 
system.  The  company  furthermore  owned  a  line  of  steamers  between  New  York  and  Norwich.  It  had  stock 
outstanding  to  the  amount  of  $19,809,000  and  a  funded  debt  of  about  $16,000,000.  Mr.  McLeod 
succeeded  Charles  Parsons  as  president  of  the  company  on  March  14, 1893.  His  ambition  was  gratified 
at  the  expense  of  antagonizing  D  rex  el,  Morgan  &  Co.,  who  had  planned  the  eventual  transfer  of  the  New 
England  road  to  the  New  York,  New  Haven  &  Hartford. 


THE  THREAT  OF  UNSOUND  CURRENCY 


353 


decline  in  value.  In  January  the  road  had  issued  a  statement  showing 
earnings  sufficient  to  pay  interest  on  its  mortgage  and  income  bonds  and 
leave  a  surplus  on  the  stock.  At  the  beginning  of  February  it  was  virtually 
bankrupt.  New  York  and  New  England  stock,  which  the  McLeod  pool  had 
hypothecated  their  Reading  securities  to  carry,  was  lamentably  weak.  The 
conditions  meant  an  inevitable  misfortune  for  the  clique.1  They  were  forced 
to  throw  over  something  in  the  absence  of  a  plentiful  supply  of  money. 
Apparently  they  chose  to  sacrifice  their  Reading  stock. 

The  Philadelphia  &  Reading  earned  $10,495,174  net  in  1892,  making  a 
yearly  surplus  of  $3,157,147 ;  and  in  1893  it  earned  $9,459,423,  showing 
a  deficit  of  $606,694.  Its  statement  issued  November  30,  1892,  showed 
$39,830,361.78  outstanding  in  common  stock,  $138,152,171.83  in  mort¬ 
gage  obligations,  and  total  liabilities  of  $232,629,997.  The  statement  of 
a  year  later  showed  stock  to  the  amount  of  $40,141,361.78,  total  liabil¬ 
ities  of  $256,732,698.99  and  a  system  of  2,222.7  miles. 

On  February  17, 1892,  the  storm  broke.  Reading  fell  from  46%  to  40%, 
and  closed  at  40%  after  sales  of  392,230  shares.  New  York  &  New 
England  dropped  about  five  points,  to  41%,  and  rallied  to  43%.  A  terrific 
mass  of  Reading  stock  was  hurled  upon  the  market  on  the 
following  day,  Saturday — more  than  half  a  million  shares  Bankruptcy 
changing  hands— and  the  price  fell  to  36%,  with  a  trivial  Reading  road, 
recovery.  On  Monday,  the  20th,  Senator  Platt  brought  a 
friendly  foreclosure  action  against  the  company,  in  the  United  States 
Circuit  Court,  and  Judge  Dallas  promptly  put  it  into  receivers’  hands.2  The 
dealing  in  the  stock  this  day  created  a  new  record  for  activity  in  any  single 
issue.  In  the  first  fifteen  minutes  196,400  shares  changed  hands,  the  sales 
amounting  to  515,625  shares  in  the  first  hour  and  to  957,955  shares  in  the 
day’s  trading.  It  must  be  borne  in  mind,  however,  that  Reading  is  a  half¬ 
stock,  each  share  having  the  par  value  of  only  $50,  so  that  two  shares  of 
it  must  be  counted  as  but  one  in  any  computation  of  the  amount  of  busi¬ 
ness  transacted.  Naturally,  the  record  for  activity  in  the  general  list  was 
broken,  the  total  sales  aggregating  1,473,953  shares  of  stock,  and  bonds 
to  the  par  value  of  $6,020,000.  Reading  stock  was  driven  down  to  28 
and  made  a  slight  recovery.  It  sold  at  25%  one  week  later. 

The  market  was  of  course  weak,  and  excitement  was  intense  during  this 
disturbance.  Irrespective  of  the  Reading  fiasco,  conditions  all  favored  a 

1  The  McLeod  pool  included  George  M.  Pullman,  United  States  Senator  Thomas  C.  Platt,  Thomas 
Dolan,  and  Samuel  Shipley ;  and,  according  to  reports,  Senator  Platt’s  United  States  Express  Company 
had  obtained  the  express  business  on  the  Reading  lines  formerly  carried  on  by  the  road’s  officials.  Mr. 
Platt  held  $55,000  of  Reading  third  preference  bonds,  and  sued  to  foreclose  the  property  on  the  ground  of 
a  default  in  the  payment  of  his  coupons. 

1  The  receivers  were  A.  A.  McLeod,  E.  P.  Wilbur,  president  of  the  Lehigh  Valley  road,  and  Judge 
Edward  M.  Paxson  of  the  Supreme  Court  of  Pennsylvania,  who  resigned  his  official  post  to  accept  the 
appointment. 


354 


THE  NEW  YORK  STOCK  EXCHANGE 


A  new  adminis¬ 
tration  and  a 
grave  problem ; 
the  Treasury 
gold  reserve 
threatened. 


decline.  The  balance  of  trade  had  turned  and  was  now  greatly  against 
us,  our  exports  being  far  less  than  those  of  the  preceding  period  of  1892, 
while  our  imports  had  increased  extravagantly.  The  currency  question 
was  already  productive  of  the  gravest  concern.  Evidence  was  not  lack¬ 
ing  of  corporate  mismanagement,  and  railroad  earnings  were 
Balance  of  trade  p0or.  It  was  in  this  month  that  the  stockholders’  investi¬ 
gated  states.  gating  committee  of  the  Northern  Pacific  road  issued  a 
report  severely  attacking  the  administration  of  the  prop¬ 
erty’s  affairs.  Mr.  Henry  Villard  had  returned  to  the  presidency  of  the 
company,  but  fresh  opposition  to  him  developed  at  this  juncture,  and  he 
resigned  office  later  in  the  year. 

On  March  4th  the  reins  of  government  passed  into  Democratic  hands. 
Mr.  Cleveland’s  inaugural  contained  a  strong  attack  upon  monopolies, 
which  tended  to  unsettle  values,  but  a  far  more  serious  trouble  lay  in  a 
problem  bequeathed  him  by  the  preceding  administration — the 
problem  of  saving  the  Treasury  gold  reserve.  The  amount  of 
free  gold1  had  fallen  to  $ 982,410  on  the  3d,  the  day  on  which 
John  G.  Carlisle  became  Secretary  of  the  Treasury.  His  pre¬ 
decessor,  Charles  Foster,  had  barely  escaped  an  impairment 
of  the  reserve— in  other  words,  its  fall  below  $100,000,000 — 
by  obtaining  $8,000,000  in  gold  from  New  York  bankers  in  exchange  for 
United  States  notes.  All  thoughtful  men  saw  that  this  method  of  relief 
could  not  be  employed  indefinitely.  Meanwhile  Europe  was  rapidly  calling 
in  the  working  capital  she  had  lent  us.  Almost  every  ocean  liner  that 
left  this  port  was  carrying  American  gold  to  her  in  payment  for  American 
securities  and  foreign  merchandise,  and  the  shipper’s  most  convenient 
source  of  gold  was  the  Treasury.  Call  money  rates  rose  to  fifty  per  cent, 
in  the  first  half  of  the  month,  but  their  sudden  recession  to  normal  figures 
on  the  17th,  coincident  with  the  renewal  of  certain  sterling  loans,  relieved 
the  tension,  and  a  rise  in  stocks  marked  the  latter  part  of  March.  Yet  the 
stream  of  gold  exports  was  continuing,  the  discount  rate  in  mercantile  bills 
had  risen  to  ten  per  cent.,  and  the  monetary  stringency  had  started  that 
large  chain  of  commercial  failures  which  made  1893  a  year  of  misery. 

Mr.  Carlisle  at  first  succeeded  in  replenishing  the  reserve  by  the  same 
plan  which  Mr.  Foster  had  employed,  inducing  the  banking  community  to 
give  to  the  Treasury  gold  in  exchange  for  other  forms  of  currency.  But 

'The  term  “free  gold”  was  used  to  designate  the  amount  of  net  gold  in  the  Treasury  in  excess  of 
$100,000,000,  the  net  gold  being  ascertained  by  deducting  from  the  entire  Treasury  stock  the  sum  which 
wras  held  as  a  special  deposit  and  against  which  gold  certificates  had  been  issued.  An  act 
The  public’s  view  of  1882  had  provided  that  whenever  the  net  gold  in  the  Treasury,  in  other  words,  the 
of  the  gold  Treasury  reserve,  should  fall  below  $100,000,000,  the  Treasury  Department  should 

reserve.  cease  the  issuance  of  gold  certificates  to  depositors  of  bullion.  By  implication,  there¬ 

fore,  this  law  placed  the  figure  below  which  it  was  unsafe  to  let  the  gold  reserve  fall  at 
$100,000,000.  The  people  took  this  view,  and  whenever  the  reserve  went  below  $100,000,000  it  was 
universally  regarded  as  impaired.  The  entire  wiping  out  of  the  reserve,  of  course,  would  mean  national 
bankruptcy. 


THE  THREAT  OF  UNSOUND  CURRENCY 


355 


continued  withdrawals  speedily  reduced  the  precious  stock.  On  April  15th 
the  free  gold  had  fallen  to  $1,850,000,  and  for  the  first  time  since  th'e 
passage  of  the  Sherman  Act  the  issuance  of  gold  certificates  in  return  for 
bullion  deposits  was  suspended.  On  Monday,  the  17th,  the  market  grew 
weak  again,  largely  influenced  by  a  break  in  Manhattan,  which  tumbled 
from  159  to  148%,  and  four  days  later  the  large  Pennsylvania  Steel  Com¬ 
pany  went  into  a  receiver’s  hands,  as  a  result  of  the  stringency.  This  day 
Mr.  Carlisle  issued  a  public  statement  that  he  would  redeem  the  Treasury 
notes  in  gold  as  long  as  he  had  gold  “lawfully  available  for  the  purpose.” 
The  publication  of  his  words  on  the  following  day,  April  22d,  produced  a 
most  disquieting  effect.  Many  persons  inferred  that  the  Sec¬ 
retary  intended  to  stop  redeeming  these  notes  in  gold  if  the  The  reserve 
reserve  should  fall  below  the  $100,000,000  mark.  The  result 
was  a  rush  to  withdraw  the  metal  from  the  Sub-Treasury  in 
New  York,  and  the  reserve  wras  impaired  for  the  first  time,  falling  to  about 
$97,000,000.  President  Cleveland  met  the  emergency  by  a  decisive  state¬ 
ment  that  the  Government  would  continue  to  pay  gold  for  Treasury  notes. 
Its  publication  on  Monday,  April  24th,  allayed  the  public  distrust  and 
checked  gold  exports,  sterling  exchange  dropping  at  once.  Through  the 
aid  of  New  York  bankers,  whom  Mr.  Carlisle  came  to  this  city  to  meet,  the 
reserve  was  again  raised  above  the  reputed  safety  mark.  But  the  time  was 
short  indeed  before  the  export  drain  made  further  inroads  on  the  Treasury 
stock. 

With  the  month  of  May  the  process  of  liquidation  in  the  stock  market 
became  quite  rapid,  but  it  was  as  yet  chiefly  confined  to  industrial  issues. 
So  far  as  international  stocks  were  concerned  the  heaviest  selling  had  come 
from  London.  Englishmen  not  only  were  moved  by  fear  of  financial  catas¬ 
trophe  here,  but  were  wincing  almost  daily  at  news  of  severe 
distress  in  Australia,  where  banks  had  been  falling  like  bricks  ^tock  market16 
in  a  row.  The  sixth  bank  failure  since  the  year’s  beginning 
occurred  on  Monday,  May  1st,  and  the  same  day  witnessed  the  breaking  up 
of  a  foreign  coffee  corner  with  resultant  disaster  to  thirty  firms  scattered 
through  Havre,  Antwerp,  Rotterdam  and  Hamburg,  and  the  failure  of  a 
large  Liverpool  sugar  house.  In  this  city  the  calling  of  loans  incidental  to 
dividends  and  interest  disbursements  carried  money  to  twelve  per  cent. 
The  entire  securities  list  receded  sharply  during  a  session  of  great  activity. 

The  weakest  issues  on  this  day  were  those  of  the  National  Cordage 
Company — a  fact  due  to  the  public  announcement  that  the  corporation 
would  put  out  new  preferred  stock  to  the  amount  of  $2,500,000,  at  par,  to 
provide  working  capital.  In  the  existing  condition  of  the  money  market 
this  incident  was  aggravating.  It  aroused  all  the  more  bitter  criticism 
because  the  Cordage  Trust  had  but  lately  doubled  its  common  stock,  and 


356 


THE  NEW  YORK  STOCK  EXCHANGE 


had  paid  a  quarterly  dividend  on  the  inflated  capital.  To  follow  such  an 
extravagant  display  of  self-satisfied  prosperity  with  an  actual  demand  for 
fresh  working  capital  took  away  the  breath  of  conservative  men.  The 
Street  concluded  that  there  was  “something  rotten  in  the  state”  of  this 
corporation.1  Its  common  and  preferred  shares  poured  upon  the  market, 
and  the  artificial  values  of  these  issues  melted  rapidly  away.  Cordage 
Common,  which  had  sold  at  75  a  few  months  previously  and  had  closed  on 
Saturday  at  57%,  fell  on  Monday  to  49% ;  it  rallied  about  two  points  and 
a  half,  evidently  on  short  covering.  The  preferred  stock — which  masquer¬ 
aded  as  an  eight  per  cent,  investment — dropped  to  99%,  a  decline  of  4% 
from  Saturday’s  close,  and  was  finally  quoted  at  99%  bid.  On  the  following 
day  there  was  renewed  weakness  in  the  general  list,  and  the  Cordage  Trust 
issues  resumed  their  journey  downward.  Closing  prices  were  50  for  the 
common  and  98  for  the  preferred. 

The  National  Cordage  Company  was  admirably  typical  of  the  so-called 
monopolies  produced  by  the  inflation  craze  of  the  period.  It  had  been 
started  three  years  earlier  by  ambitious  promoters  who 
The  Cordage  thought  it  both  easy  and  profitable  to  control  the  twine  man- 
fru^o^monopoiy.  ufacture  of  the  country.  The  first  flush  of  prosperity  had 
induced  its  managers  to  water  its  capital  and  distribute  its 
assets  in  dividends,  while  they  urged  their  friends  to  invest  every  spare 
dollar  in  the  new  Golconda.  For  a  time  the  management,  like  a  circus  per¬ 
former  bestriding  two  horses,  seemed  to  have  the  campaign  in  Wall  Street 
and  the  business  of  the  company  under  equal  control. 

It  was  in  the  beginning  of  May,  1893,  that  the  unhappy  denouement 
took  place.  The  National  Cordage  Company  had  to  expect  an  annual 
period  of  strain  just  before  summer,*  and  this  year  its  resources  had  been 
too  severely  drawn  upon  to  stand  it.  The  market  position  of  the  stock 
was  as  weak  as  the  company’s  administration.  Mr.  Waterbury,  the  presi¬ 
dent,  had  a  large  acquaintance  among  fashionable  and  wealthy  young  men 
who  were  well  disposed  towards  picking  up  a  profit  in  Wall  street.  Many 

1  The  National  Cordage  Company  was  organized  in  1890  and  took  in  most  of  the  twine  concerns  in 
the  country,  frequently  using  a  policy  of  threats  to  induce  them  to  enter  the  combination.  It  had 
$10,000,000  of  common  stock,  on  which  it  had  paid  nine  per  cent,  in  1891,  and  ten  and  a  half  per  cent,  in 
1892,  and  three  per  cent,  in  February,  1893,  when  it  doubled  the  number  of  common  shares  outstanding, 
soon  afterwards  declaring  a  quarterly  dividend  of  one  and  a  half  per  cent,  on  the  entire  $20,000,000. 
The  preferred  stock,  which  paid  eight  percent.,  amounted  to  $5,000,000.  James  M.  Waterbury  was  the 
president,  and  Frank  T.  Wall  and  Chauncey  Marshall  were  the  vice-presidents,  of  the  company. 

Foremost  among  the  Cordage  Trust’s  competitors  was  John  Good,  a  rival  who  was  rendered  formid¬ 
able  by  his  control  of  valuable  patents  and  his  thorough  acquaintance  with  the  business.  When  the  trust 
was  formed  an  arrangement  was  made  to  restrain  Mr.  Good’s  activities.  The  sum  of  $200,000  was  paid 
him  yearly  to  remain  idle,  and  an  option  was  taken  on  his  plant.  In  April,  1892,  he  formally  notified  the 
trust  that  he  considered  their  compact  no  longer  binding,  and  that  he  proposed  to  re-enter  business. 
Thereupon  he  formed  the  John  Good  Cordage  &  Machine  Company,  with  a  capital  of  $2,000,000,  and 
resumed  the  making  of  twine.  The  National  Cordage  Company  began  a  rate  war  with  Mr.  Good,  which 
he  could  stand,  but  which  the  corporation  could  not.  The  high  prices  it  had  paid  for  some  of  the  mills  it 
took  in  made  a  weak  spot  in  its  armor. 

2  Inasmuch  as  summer  was  the  active  market  season  for  binding  twine  and  cordage,  it  was  neces¬ 
sarily  preceded  by  heavy  outlays  in  manufacturing  without  immediate  compensation. 


THE  THREAT  OF  UNSOUND  CURRENCY 


357 


of  them  had  been  induced  to  “go  long”  of  a  large  quantity  of  Cordage. 
The  whole  set  were  bulling  it — the  stock  was  too  good  to  sell.  Their 
buying  had  raised  the  prices  to  artificial  levels,  and  when  an  ill  turn  in  the 
company’s  affairs  made  it  advisable  to  market  the  securities  the  buying 
power  had  been  virtually  exhausted. 

When  the  banks  began  calling  loans  on  Wednesday,  May  3d,1  and 
thereby  started  a  flurry  in  industrials,  Cordage  Trust  issues  were  the 
weakest  of  the  weak.  The  common  plunged  from  49%  to  35 %,  and  rallied 
but  a  point  and  a  half,  while  the  preferred  fell  to  83,  and  w*as  vainly  offered 
at  82  at  the  close.  Chicago  Gas  dropped  from  81  to  68%,  and  rallied  about 
two  points  this  day,  while  Sugar,  after  opening  at  96,  about  a  point  below 
Tuesday’s  close,  fell  to  89%  and  made  but  a  trivial  recovery.  On  Thursday 
the  industrial  market  reached  a  panicky  condition,  though  railroad  issues 
were  comparatively  firm.  The  rate  for  call  loans  on  industrials  ran  up  to 
twenty  per  cent.,  while  call  money  was  still  obtainable  on  railroad  collat¬ 
eral  at  six.  Cordage  shares,  in  which  there  was  great  activity,  plunged 
rapidly  downward,  the  common  tumbling  from  37  to  18%,  and  closing  at  20, 
while  the  preferred  declined  from  78  to  65,  and  rallied  two  points.  Man¬ 
hattan  fell  ten  points,  to  125,  and  Burlington  receded  four  points  and  a 
half,  but  weakness  was  mainly  centered  in  the  industrials.  Sugar  dropped 
to  83,  and  General  Electric  to  79%,  the  prices  involving  a  loss  of  more  than 
twenty-one  points,  since  April  28,  in  each  of  these  issues.  About  twenty 
minutes  after  the  opening  the  suspension  of  Henry  Allen  &  Co.,*  a  direct 
result  of  the  Cordage  decline,  was  announced.  A  short  time  later  the  names 
of  Bernard  L.  Smyth  &  Co.,  and  Schuyler  Waldron,  were  read  from  the 
rostrum.  They,  too,  had  been  drawn  into  the  Cordage  whirlpool  through 
the  action  of  customers  unable  or  unwilling  to  meet  obligations.  Late  that 
evening  the  directors  of  the  National  Cordage  Company  met  at  the  Front 
street  office  of  the  corporation  and,  after  considering  its  inability  to  repay 
a  bank  loan  of  $50,000,  decided  to  apply  for  a  receivership.  The  news  of 
the  appointment  of  the  receivers — George  Weaver  Loper  and  E.  F.  C. 
Young — confronted  Wall  street  on  the  following  morning. 

It  was  on  this  day,  Friday,  May  5,  that  the  “White  panic,”  the  most 
exciting  event  of  the  year,  took  place.  Mr.  S.  Y.  White,  who 
had  for  long  months  been  bringing  his  conspicuous  pluck  and 
ability  to  bear  on  the  task  of  paying  up  old  debts,  was  com¬ 
pelled  to  announce  his  fourth  suspension.  He  had  made  money  rapidly 


The  “White 
panic.” 


1  There  was  one  failure  on  ’Change  this  day— that  of  A.  H.  Wheeler— the  first  occurring  since  the 
establishment  of  the  Stock  Exchange  Clearing  House  on  May  17,  1892. 

2  Henry  Allen  &  Co.  were  understood  to  be  carrying  40,000  shares  of  Cordage  common,  bought  at 
60,  and  to  have  been  depending  upon  a  loan  of  $200,000  to  be  furnished  by  the  National  Cordage  Com¬ 
pany’s  president,  James  M.  Waterbury.  Mr.  Waterbury  had  become  too  deeply  involved  to  help  any  one. 
He  had  heavily  endorsed  the  company’s  notes,  and,  when  they  fell  due  and  could  not  be  renewed,  he  was 
compelled  to  face  a  ruinous  loss. 


358 


THE  NEW  YORK  STOCK  EXCHANGE 


through  the  winter,  but  had  suffered  a  recent  and  disastrous  loss  in  the  fall 
of  Whiskey  Trust  shares.  With  weakened  resources  he  had  conducted  exten¬ 
sive  bull  campaigns  in  Sugar  and  Manhattan,  and,  it  is  said,  placed  undue 
reliance  on  the  fidelity  of  a  coadjutor  intimately  associated  with  the  man¬ 
agement  of  the  American  Sugar  Refining  Company.  The  tendencies  of  the 
year  made  but  one  outcome  possible.  Mr.  "White  had  added  to  his  funds  by 
the  liberal  sale  of  “puts”  on  his  favorite  stocks.  As  the  market  dropped, 
these  outstanding  privileges  increased  his  financial  peril.  He  made  public 
his  defeat  shortly  before  eleven  o’clock  on  this  Friday  morning.  The 
Exchange  immediately  became  a  scene  of  fierce  excitement.  The  bears 
jumped  at  their  opportunity  to  uncover  weak  spots,  and  a  mountain  of 
long  stock,  thrown  suddenly  upon  the  market,  made  their  success  easy. 
Visitors  packed  the  gallery,  fascinated  by  the  spectacle  of  struggling  crowds 
below,  or  pale  with  apprehension  of  personal  ruin.  The  failures  of  Ferris 
&  Kimball  and  of  W.  L.  Patton  &  Co.  were  announced  not  long  after  that 
of  Mr.  White,  and  the  wires  brought  speedy  news  of  similar  trouble  in 
Boston.  A  rapid  rise  in  call  rates  of  money  to  forty  per  cent,  facilitated  the 
selling  movement. 

About  one  o’clock,  the  liquidation  having  spent  itself,  the  bears  began 
to  cover,  and  stocks  rose  well  nigh  as  rapidly  as  they  had  fallen.1  Cordage 
common,  which  had  opened  at  19  and  fallen  to  15%,  rallied  about  6  points, 
while  the  preferred,  after  declining  to  45,  recovered  as  sharply  and  closed  at 
59  bid.  Other  fluctuations  were  as  follows,  the  high  prices  having  been 
made  early  in  the  day ■ 


Stock. 

Opening. 

High. 

Low. 

Close. 

Sugar, 

85 

86% 

62 

79% 

General  Electric, 

80 

84 

58 

78% 

Chicago  Gas, 

74 

74% 

59 

72% 

Manhattan, 

126 

130% 

115 

128 

Mr.  White  bore  his  misfortune  with  philosophic  calm.  He  was  able  in 
time  to  resume  active  operations,  but  never  on  the  scale  to  which  he  had 
been  accustomed  in  the  days  of  the  Lackawanna  “squeeze.” 

By  a  curious  paradox,  early  in  May,  while  the  country  as  a  whole  was 
suffering  from  monetary  stringency  which  was  producing  a  terrible  series 
of  bankruptcies,  and  while  lenders  upon  securities  were  injuring  the  price  of 
industrial  shares  by  discriminating  against  them,  the  call  rates  in  Wall 
street  still  remained  low.  This  fact  accounts  for  a  brief  period  of  firmness 

1  The  violence  of  the  decline  and  recovery  was  illustrated  by  the  experience  of  a  broker  who  received 
an  order,  when  General  Electric  had  fallen  to  70,  to  sell  500  shares  of  that  stock.  Upon  reaching  the  Gen¬ 
eral  Electric  trading  poet  he  found  that  the  price  had  fallen  twelve  points  more  to  58,  and  he  offered  his 
stock  at  that  figure.  The  best  bid  was  at  53,  and  the  broker  turned  away  momentarily  to  execute  another 
order,  rather  than  sell  the  stock  at  such  a  sacrifice.  Returning  almost  at  once  to  the  General  Electric  post, 
he  heard  some  one  shouting,  “Nine  for  a  hundred.”  He  disposed  of  his  500  at  “  nine,”  and  then  discovered 
to  his  astonishment  that  he  was  getting  69,  not  59,  for  the  stock.  Afterward  it  ran  promptly  up  to 
above  80. 


THE  THREAT  OF  UNSOUND  CURRENCY 


359 


in  the  middle  of  the  month,  existing  in  the  face  of  continual  gold  exports. 
Bad  news  of  all  sorts  kept  pouring  into  the  city  day  by  day.  The  failure 
on  May  9th  of  the  Chemical  National  Bank  of  Chicago  precipitated  the 
downfall  of  two  other  institutions  soon  afterward — the  Columbia  National 
Bank  of  Chicago  and  the  Capital  National  Bank  of  Illinois. 

The  president  of  the  Columbia  Bank  —  Zimri  D wiggins — had  TemP°rary 

.  .  .  firmness  of  stocks 

formed  a  chain  of  dependent  banking  institutions  in  Indiana,  in  mid-May. 
and  these  went  speedily  toppling  over.1  A  few  days  later  the 
largest  loan  company  of  Minnesota — the  Northwestern  Guaranty  Loan 
Company — succumbed  to  the  influence  of  tight  money,  while  three  more 
Australian  bank  failures  induced  London  selling  in  our  markets.  The 
Archer-Pancoast  Manufacturing  Company,  one  of  the  foremost  makers  of 
gas  and  electric  light  fixtures  in  the  United  States,  went  to  the  wall 
with  liabilities  estimated  at  $1,000,000.  The  industrial  situation  was 
further  disturbed  by  a  sharp  break  in  Whiskey  Trust  shares.  The  Attor¬ 
ney  General  of  Illinois  began  an  action  against  the  Distillers  &  Cattle 
Feeding  Company,  and  almost  immediately  afterward  five  of  the  Trust’s 
largest  distilleries  broke  away  from  the  combination  because  of  nonpay¬ 
ment  of  rentals  due  the  owners. 

The  latter  part  of  May  ended  badly  for  the  bulls,  in  consequence  of  a 
succession  of  reported  difficulties.  There  were  several  fresh  bank  failures 
(among  others  that  of  a  small  institution  in  this  city,  the  National  Bank 
of  Deposit),  but  the  circumstance  most  depressing  in  effect  was  the  finan¬ 
cial  ruin  of  Charles  Foster,  Secretary  of  the  Treasury  under 
Mr.  Harrison.  In  his  official  capacity  Mr.  Foster  had  advo-  Failure  of 
cated  the  passage  of  the  Sherman  Silver  Purchase  act. 


Nemesis  had  decreed  that  he  should  be  numbered  among  its 


ex-Secretary 

Foster. 


early  victims.  It  was  his  inability  to  obtain  the  usual  monetary  accom¬ 
modations  that  carried  down  the  bank  of  Foster  &  Co.,  and  the  various 
industrial  concerns  of  Fostoria,  0.,  with  which  the  ex-Secretary  was  iden¬ 
tified.  His  prominence  accentuated  the  gloomy  effect  of  the  disaster. 

On  the  3d  of  June  the  long  drain  of  Treasury  gold  imposed  by  the 
incessant  shipments  of  bars  and  eagles  to  Europe  forced  a  shrinkage  of  the 
reserve  to  a  new  low  record  point,2  and  three  days  later  a  sharp  tightening 
of  call  rates  ended  Wall  street’s  enjoyment  of  easy  money.  New  York  had 
heard  a  cry  of  distress  from  the  west,  and  currency  was  whirled  away  into 
the  interior  at  the  rate  of  $8,000,000  a  week.  The  chief  trouble  was  in 


1  In  connection  with  these  bankruptcies,  it  is  worth  noticing  that  Mr.  Eckels,  the  Comptroller  of  the 
Currency,  expressed  the  opinion,  in  a  newspaper  interview  published  on  May  20th,  that  the  causes  of  the 
bank  failures  of  the  time  were  bad  management  and  speculation. 

2  The  reserve  stood  at  $89,931,217  on  this  day.  Exports  of  gold  since  the  beginning  of  the  year 
had  amounted,  by  June  3d,  to  more  than  $67,000,000.  Furthermore,  in  the  first  twenty  weeks  of  1893 
our  imports  of  merchandise  had  exceeded  merchandise  exports  by  about  $53,000,000. 


360 


THE  NEW  YORK  STOCK  EXCHANGE 


New  York  for 
currency. 


Chicago,  where  a  new  series  of  heavy  failures  had  frightened  the  public. 
The  streets  on  which  Chicago  savings  banks  fronted  were  thronged  with 
scared  depositors,  and  paying  tellers  stood  for  long  weary  hours  counting 
out  currency,  which  New  York  was  called  on  in  large  measure  to  supply.1 

The  Chicago  savings  institutions  weathered  the  storm.  A 
Chicago  calls  on  week  later  a  run  on  the  savings  banks  of  Omaha  took  place, 
following  the  news  of  two  failures  there.  Similar  trouble  was 
threatened  in  Detroit,  where  bank  officials  issued  a  joint 
circular  to  depositors  beseeching  them  to  be  calm. 

Meanwhile  the  New  York  stock  market  was  still  giving  way.  Prices  in 
the  early  part  of  June  kept  sagging  steadily,  but  the  dulness  of  the  market 
prevented  a  sudden  break.  An  atmosphere  of  gloom  had  settled  over  the 
entire  country.  The  stream  of  gold  exports  had  at  last  been  checked,  yet 
no  one  seemed  able  to  take  a  cheerful  view  of  the  future.  Day  after  day 
developed  a  fresh  cluster  of  mercantile  failures,  with  here  and  there  the 
downfall  of  a  bank,  and  brought  home  to  thinking  men  the  extremity  of 
the  situation. 

With  these  circumstances  the  Clearing  House  Association  decided  to 
protect  the  banks  by  a  resort  to  a  well  tried  and  trusted  expedient — the 
issue  of  Clearing  House  loan  certificates  to  members.2  This  step  was  taken 
on  June  15th,  and  for  a  considerable  time  afterwards  the 
banks  all  limited  their  payments  of  currency  for  checks 
in  such  fashion  as  the  period  required.  It  was  generally 
realized  that,  while  they  had  no  legal  right  to  do  this,  their 
stand  was  abundantly  justified.  The  condition  in  effect  was 
one  of  partial  suspension  of  currency  payments.  It  speedily 
resulted  in  the  creation  of  a  new  sort  of  business — that  of 
bank  checks.  Certain  Wall  street  offices  were  soon  actively 
engaged  in  furnishing  currency  to  persons  who  were  willing  to  give  a 
premium  for  it,  making  their  payments  by  check. 

London  commenced  to  rebuy  our  securities  a  month  or  two  before  the 
low  price  level  was  reached.  In  mid- June  quite  heavy  purchases  by 
Englishmen  turned  the  foreign  exchange  account  in  our  favor.  As 
exchange  declined  Wall  Street’s  spirits  revived,  and  when,  on 
June  21st,  the  announcement  was  made  that  half  a  million  in 
gold  had  been  engaged  for  import,  stocks  had  a  moderate 
rally.  Soon  afterward  weakness  was  engendered  by  new 
bank  failures,  and  on  June  26th  the  market  received  a  blow  which 


Clearing  House 

certificates 

issued;  the 

banks  virtually 

suspending 

currency 

payments. 


dealing  in 


Stocks  rallied  by 
news  of  gold 
imports. 


1  The  failure  at  this  time  of  the  Kansas  Grain  Company  of  Kansas  City — an  important  grain  buyer — and 
of  banks  in  Spokane,  Washington,  and  Sandusky,  Ohio,  increased  the  feeling  of  apprehension  in  Chicago. 

2  These  certificates  bore  interest  at  the  rate  of  six  per  cent.  In  all,  $41,490,000  of  them  were  issued, 
a  larger  amount  than  had  been  put  out  in  any  previous  year.  Between  August  20th  and  September  6th 
there  were  outstanding  $38,280,000  of  these  certificates  at  one  time.  On  November  1st  the  last  of  them 
was  cancelled. 


THE  THREAT  OF  UNSOUND  CURRENCY  361 


THE  STOCK  EXCHANGE  IN  BBOAD  STBEET,  1893 


materially  quickened  its  journey  toward  the  bottom.  This  was  the  closing 
of  the  Indian  mints  to  the  free  coinage  of  silver.  The  announcement  of  the 
India  Council’s  decision,  made  to  Parliament  by  Mr.  Gladstone  and  the 
Earl  of  Kimberley,  produced  a  world-wide  shock.  To  this  country  it  came 
with  most  unhappy  significance.  The  decline  in  silver  which  it  fore¬ 
shadowed  was  destined  to  cripple  an  important  mining  industry  in  the 


362 


THE  NEW  YORK  STOCK  EXCHANGE 


West  and  to  increase  the  strain  upon  the  Government’s  credit — a  strain 
which  had  already  plunged  the  country  into  a  commercial  depression. 

Silver  bullion,1  which  was  worth  81%  cents  an  ounce  on  the 
^lver VT  bl°W  t0  24th,  fell  to  77  cents  on  the  26th,  to  68%  cents  on  the  28th 
(a  day  marked  by  pronounced  weakness  in  stocks  and  one 
failure  on  ’Change),  and  to  62  cents  on  the  29th,  when  call  money  ran  up 
seventy-five  per  cent,  and  was  promptly  lowered  to  three  per  cent,  by  the 
concerted  action  of  the  banks,  which  took  out  $5,000,000  in  loan  certifi¬ 
cates.  President  Cleveland  realized  that  the  new  feature  of  the  financial 
situation  made  it  inexcusable  to  delay  the  repeal  of  the  Sherman  Act. 
Accordingly,  on  June  30th,  he  issued  a  message  calling  an  extra  session  of 
Congress  to  convene  on  August  7th,  for  the  alleviation  of  the  country’s 
financial  distress. 

Throughout  the  summer  of  1893  the  current  news  abounded  with 
reports  of  bank  and  mercantile  failures  in  every  section  of  the  United 
States.  Everywhere  credit  was  fearfully  contracted.  Merchants  and 
manufacturers  were  forced  to  the  wall  in  thousands,  by  inability  to  get  the 
monetary  accommodations  to  which  they  were  used  and  on 
Harvest  which  they  depended.  With  every  fresh  failure  the  huge 

cornered 

the  bears.  army  of  unemployed  men  was  swelled,  and  solvent  concerns 
suffered  from  the  lessened  resources  of  the  public.  In  New 
York  City  and  in  Denver — where  15,000  men  were  discharged  by  railways, 
mines  and  factories  because  of  the  silver  depression — rioters  proclaimed 
their  hunger  in  the  streets  and  bloodshed  was  frequent.  The  stock 
„  ,  x  market  could  not,  of  course,  withstand  the  tendencies  of 
of  the  Erie.  the  hour.  Prices  sagged  when  they  did  not  break.  The 

Low  level  of  weakness  of  stocks  was  accentuated  by  an  active  bear  party, 

lepamL.  which  was  reaping  a  harvest  out  of  the  panic.  Of  these 
the  most  conspicuous  was  II.  G.  Weil,  whose  method  in  depressing  prices 
incidentally  earned  him  a  year’s  suspension  from  the  Exchange.  There 
was  a  sharp  break  on  July  11th,  and  a  still  sharper  one — amounting  to 
from  2  to  8%  points  in  the  leading  stocks — on  the  18th,  when  a  financial 
scare  in  London  was  the  factor  of  chief  influence.  A  crash  in  Denver,  where 
thirteen  savings  banks  went  to  the  wall,  and  failures  in  Milwaukee  were 
among  the  current  misfortunes.  On  July  25th  the  Granger  stocks  were 
hit  by  the  downfall  of  the  Wisconsin  Marine  and  Fire  Insurance  Com¬ 
pany  Bank  of  Milwaukee,  an  institution  thus  far  rated  among  the 


1The  Indian  mints  had  been  open  since  1835  to  the  free  coinage  of  silver,  but  the  continuous  fall  in 
value  of  the  rupee  had  compelled  the  British  Government  to  change  its  policy  in  this  respect.  The  trade 
between  England  and  India  was  being  seriously  injured  by  the  decline  in  silver.  At  the  time  of  the  passage 
of  the  Bland-Allison  bill  in  February,  1878,  silver  was  worth  $1.22  cents  an  ounce,  and  the  intrinsic  value 
of  the  metal  in  a  silver  dollar  was  93  cents.  Silver  fell  to  92  cents  an  ounce  while  this  measure  was  in 
force.  Upon  the  passage  of  the  Sherman  Silver  Purchase  Act,  in  1890,  it  ran  rapidly  up  to  $1.21  an 
ounce,  but  speedily  fell  away  again. 


THE  THREAT  OF  UNSOUND  CURRENCY 


363 


strongest  of  the  West.1  On  the  following  day,  when  the  market  learned 
that  the  Erie  Railroad  had  gone  into  receivers’  hands,  and  on 
July  31st,  the  low  levels  of  the  panic  were  reached.*  About  noon  on  the 
latter  date  the  bears  started  a  covering  movement,  in  which  the  market 
began  its  upward  journey  out  of  the  slough  of  despond.3 

*0n  July  18tli  the  firm  of  A.  J.  Weil  &Co.  sold  to  Harvey  Fisk  &  Sons  $50,000  worth  of  Government 
4s.  at  110,  three-quarters  of  a  point  below  the  regular  market,  “for  currency.”  The  purchasers  regarded  a 
sale  on  these  terms  as  being  designed  to  injure  public  confidence.  They  determined  to  punish  the  sellers  by 
making  payment  in  five  and  ten  dollar  gold  pieces,  and  the  Messrs.  Weil  were  obliged  (under  threat  of 
having  the  bonds  bought  in  for  their  account  “under  the  rule”  if  they  declined  to  accept  the  gold)  to  hire 
a  cab  and  remove  their  coin.  On  the  18th  also,  H.  G.  Weil  of  this  firm  created  some  stir  by  demanding 
$50,000  in  cash  from  the  Manhattan  Bank  in  payment  of  his  check.  The  bank  refused  to  let  him  have 
more  than  $25,000,  and  two  days  later  obliged  him  to  take  up  his  account.  He  afterwards  let  slip  the 
remark,  on  the  floor  of  the  Exchange,  that  the  bank  of  the  Manhattan  Company  could  not  pay  him  cash. 
This  remark  and  the  previous  action  of  his  firm  in  the  matter  of  the  bond  sale  produced  considerable 
feeling  in  the  Street. 

On  July  21st  the  Board  of  Governors  of  the  Stock  Exchange  adopted  certain  new  rules,  among  them 
the  following:  “All  offers  to  buy  or  sell  securities  requiring  a  form  of  contract  or  mode  of  dealing  other 
than  is  duly  provided  for  by  the  medium  of  the  Clearing  House  or  by  other  regulations  of  the  constitution 
shall  be  deemed  in  contravention  of  the  rules  of  the  Exchange,  and  render  members  liable  to  suspension  or 
expulsion.” 

On  August  4th  Mr.  H.  G.  Weil  was  suspended  from  membership  in  the  Exchange  for  one  year 
because  of  the  Manhattan  Bank  incident. 


2The  Milwaukee  institution  was  called  the  Mitchell  bank  because  of  the  interest  in  it  held  by  J.  L. 
Mitchell,  United  States  Senator  from  Wisconsin.  The  following  table  illustrates  the  course  of  the  Granger 
stocks  on  July  25th : 


Stock.  High.  Low.  Close. 

Chi.  &  N.  W., .  95%  89  90% 

St.  Paul, .  52%  48%  50% 

C.,  B.  &  Q., .  74%  70  71 


30n  Tuesday,  July  25th,  Judge  Lacombe  put  the  New  York,  Lake  Erie  &  Western  road  into  the  hands 
of  John  King  (its  president),  and  J.  G.  McCullough,  as  receivers,  because  of  inability  to  meet  its  floating 
debt.  The  suit  was  a  friendly  one,  brought  by  Trenor  L.  Park,  a  bondholder.  In  the  panic  of  the  follow¬ 
ing  day  call  money  rose  to  T\  per  cent,  a  day,  Erie  fell  from  9%  to  7%,  Manhattan  from  111  to  par,  Dela¬ 
ware  &  Hudson  from  111  to  102%,  Lake  Shore  from  114  to  106,  and  Western  Union  from  73%  to  67%;  the 
recovery  was  slight.  H.  I.  Nichols  &  Co.  and  John  B.  Dumont  &  Co.  were  forced  to  suspend. 

Following  is  a  table  illustrating  the  movement  of  prices  between  April  and  October,  in  1893 : 


High, 

Low, 

Low, 

Low, 

Low, 

High, 

High, 

Stock. 

April  28. 

May  4. 

May  5. 

July  26. 

July  31. 

Sept.  25. 

Oct.  28. 

Am.  Sugar, 

104% 

83 

62 

67 

61% 

90% 

104% 

A.,  T.  &  S.  Fe,  .  . 

33% 

27% 

27% 

12% 

12% 

22% 

23% 

Chic.,  B.  &  Q.,  . 

94% 

85 

83% 

69% 

69% 

87 

87% 

Chic.  Gas, 

87 

69% 

59 

43% 

39 

63% 

69% 

C.,  M.  &  St.  P.,  .  . 

78% 

71% 

72 

46% 

48% 

62% 

68% 

D.,  L.  &  W., 

145 

140% 

138% 

130 

127 

139% 

170% 

Dist.  &  C.  F.,  . 

26% 

21% 

20% 

13% 

12 

22% 

34 

Gen.  Elec.,* 

101 

79% 

58 

40% 

35% 

47% 

51 

Louis.  &Na.,  . 

74% 

70% 

70% 

47% 

49% 

58% 

52% 

Manhattan, 

149 

125 

115 

100 

101 

121% 

135 

Mo.  Pac.,  . 

48% 

38% 

38% 

16% 

16% 

28% 

29% 

Nat.  Cord.,  com.,t  . 

61% 

18% 

15% 

13% 

11 

23% 

27% 

Nat.  Lead, 

39% 

32% 

26 

20% 

19 

32% 

29% 

N.  Y.  &  N.  Eng.,  . 

32% 

26% 

25 

18% 

16% 

23% 

36% 

N.  Y.  Cent., 

107% 

103% 

103 

92 

95% 

104% 

104 

N.  Y.,L.  E.  &W.,  . 

21% 

19% 

19% 

7% 

8% 

15% 

16 

No.  Pac.,  com.,$ 

16% 

14% 

14% 

7% 

7% 

7% 

7% 

Phil.  &  Read.,  . 

30 

24 

24 

12% 

12 

20% 

23 

Un.  Pac.,  . 

37% 

31% 

33% 

15% 

16% 

24% 

21 

West.  Un.,  . 

92% 

82 

80% 

67% 

67% 

83% 

93% 

*  Sold  at  31%  on  July  28th. 

f  Cordage  common  sold  at  9%  on  July  29th.  An  assessment  was  paid  on  the  stock  later  and  figures 
in  the  prices  given  under  subsequent  dates, 
t  Sold  at  4%  on  August  15th. 


364 


THE  NEW  YORK  STOCK  EXCHANGE 


The  next  few  weeks  witnessed  a  sharp  advance  in  prices  in  the  teeth  of  a 
continuance  of  bankruptcy  and  misery,  The  existence  of  good  crops ;  the 
addition  to  railroad  earnings  caused  by  the  World’s  Fair  at  Chicago,  an 
expansion  of  the  gold  import  movement  and  the  hope  of  a  repeal  of  the 
Sherman  Act,  were  the  few  bright  spots  in  the  situation.  The  influx  of  gold 
was  due  partly  to  the  purchases  of  stocks  for  foreign  account  and  partly  to 
the  fact  that  Americans  bought  securities  here  and  sent  them  to  London  to 
be  carried  because  of  the  easy  British  money  rate.  In  the  seven  weeks 
ending  with  September  2d,  gold  imports  reached  a  total  of  $42,000,000. 

Currency  rose  to  a  premium  of  five  per  cent,  of  the  face  value  of  checks, 
early  in  August,  and  the  effect  of  the  virtual  bank  suspension  was  so  wide¬ 
spread  that  diners  in  restaurants  in  all  parts  of  the  city  paid  by  check 
for  their  more  costly  meals  and  often  got  their  change  in  checks.  Savings 
banks  were  as  anxious  for  protection  as  were  Clearing  House  institutions, 
and  they  combined  to  enforce  the  rules  requiring  advance  notice  from 
depositors  who  intended  to  withdraw  funds.  On  Monday,  August  7th, 
Congress  convened  in  special  session,  and  received  a  strongly  worded 
message  from  the  President  dealing  with  the  crisis.1  The  fact  that  the 
message  also  contained  an  allusion  to  tariff  changes  caused  some  selling  of 
industrials  on  the  following  day ;  the  market  was  further  weakened  by  the 
news  of  the  Madison  Square  Bank’s  collapse — a  result  of 
Congress  meets  m  0fgcjai  treachery  —  and  a  leading  brokerage  firm  suspended 

The  Northern  on  ’Change.  A  week  later  the  Northern  Pacific  Railroad 
Pacific  goes  into  Company,  from  the  control  of  which  Mr.  Henry  Yillard  had 
receivers^  °f  recently  withdrawn,  was  pronounced  a  bankrupt.  Its  float¬ 
ing  debt  of  $9,000,000  and  the  business  depression  in  its 
territory  were  the  prime  causes  of  misfortune.  Thomas  F.  Oakes,  Presi¬ 
dent  of  the  company,  Henry  C.  Rouse  and  Henry  Payne  were  appointed 
receivers. 

Throughout  many  succeeding  weeks,  while  hungry  workmen  rioted  in 
the  streets  of  New  York  and  Chicago,  and  the  terrible  lists  of  bank  and 
mercantile  failures  grew  like  a  mortuary  roll  in  a  time  of  plague,  Senators 
haggled  and  debated  over  the  question  of  applying  the  remedy  most 
needed.  The  House  acted  with  fair  promptitude.  On  August  28th  it 
passed  the  Wilson  bill,  repealing  the  purchasing  clauses  of  the  Sherman 
Act,  by  a  vote  of  240  to  210,  and  killed  half  a  dozen  inflation  measures 
also.  Early  in  September  the  influence  of  the  gold  imports  strengthened 

1The  following  excerpt  from  Mr.  Cleveland’s  message  on  this  occasion,  will  be  of  interest:  “The 

matter  rises  above  the  plane  of  party  politics . At  times  like  the  present,  when  the  evils  of  unsound 

finance  threaten  us,  the  speculator  may  anticipate  a  harvest  gathered  from  the  misfortunes  of  others ;  the 
capitalist  may  protect  himself  by  hoarding  or  may  even  find  profit  in  the  fluctuation  of  values ;  but  the 
wage-earner— the  first  to  be  injured  by  a  depreciated  currency  and  the  last  to  receive  the  benefit  of  its  cor¬ 
rection — is  practically  defenseless.  He  relies  for  work  upon  the  ventures  of  confident  and  contented  capital. 
This  failing  him,  his  condition  is  without  alleviation,  for  he  can  neither  prey  on  the  misfortunes  of  others 
nor  hoard  his  labor.” 


THE  THREAT  OF  UNSOUND  CURRENCY 


365 


The  end  of 
the  panic. 


prices  of  securities,1  and  on  the  fifth  of  the  month  the  practical  disap¬ 
pearance  of  the  currency  premiums  marked  the  end  of  panic  conditions. 
The  banks  were  freely  paying  cash  for  checks  and  drafts. 

Confidence  had  returned  in  some  measure  and  seemed  to  be 
growing.  But  the  Senate’s  action  on  the  silver  purchase 
repeal  measure  was  insufferably  slow.  As  day  followed  day  without 
bringing  a  death  blow  to  the  financial  evil,  the  business  of  the  country, 
which  had  begun  to  revive,  fell  away  again.2  Growing  bank  reserves, 
at  the  very  period  when  the  crop  movement  should  make  capital  in  keen 
demand,  indicated  the  feebleness  of  our  commercial  health.  Security  prices 
sagged  monotonously,  the  decline  culminating  in  a  sharp  flurry  on  October 
13th,  when  the  great  Union  Pacific  system  went  into  the  hands  of  receivers.3 
Directly  afterwards  there  began  a  sharp  advance  in  the  market,  stimulated 
by  good  evidence  that  the  silver  repeal  bill  was  to  be  successful.  In  fact 
the  Senate  passed  the  measure  in  an  amended  form  toward 
the  end  of  the  month,  and  on  November  1st  it  was  repassed  T]ie  repeal 

by  the  House  and  signed  by  the  President.  The  resulting  in  October, 

improvement  itself  culminated  on  October  28th,  but  a 
somewhat  independent  advance  in  the  coal  stocks,  which  had  begun  while 
the  general  list  was  yet  dull  and  weak,  reached  its  extreme  one  week  earlier, 
when  Delaware,  Lackawanna  &  Western  stock  sold  at  $171.50  a  share. 
The  rise  in  this  issue  was  largely  due  to  the  aggressive  manipulation  of 
Mr.  S.  V.  White,  whose  previous  misfortunes  had  not  impaired  his 
courage  or  annihilated  his  resources.  His  campaign  was  aided  by  the 
entrance  of  important  new  interests  into  the  property. 

The  passage  of  the  silver  repeal  bill  was  succeeded  by  an  instant 
improvement  in  business,  shown  through  an  increase  in  bank  clearances 
and  a  decrease  in  the  number  of  failures.  Good  railway  traffic 

.  .  _  Some  lmprove- 

returns  and  absorption  of  bonds  by  investors  strengthened  mentin 
the  market.  However,  it  sustained  a  setback  after  the  making  commercial 
public,  on  November  27th,  of  the  text  of  the  Wilson  tariff  condltlons- 
bill,  fathered  by  Mr.  Wilson,  Chairman  of  the  House  Committee  on  Ways 
and  Means.  The  measure  placed  most  raw  materials  on  the  free  list  and 


1  These  imports  totaled  $42,000,000  in  the  seven  weeks  ending  September  24th. 

2  The  Thurber-Wyland  Company,  a  large  New  York  grocery  concern,  which  went  into  bankruptcy  in 
November, testified  to  this  fact  in  a  statementof  the  causes  of  its  failure.  “If  Congress  had  acted  promptly 
in  repealing  the  silver  bill,”  said  the  company,  “we  might  have  recovered  the  ground  previously  lost,  but 
the  long  delay  at  Washington  greatly  injured  the  fall  trade  and  complicated  the  situation.” 

301iver  W.  Miuk,  E.  Ellery  Anderson,  and  John  W.  Doane  were  the  receivers  first  appointed  for  the 
Union  Pacific  road.  Its  president,  at  the  time  of  the  failure,  was  S.  H.  H.  Clark.  The  company  had  control  of 
lines  aggregating  7,690.77  miles.  Its  outstanding  stock  amounted  to  about  $61,000,000,  and  it  had  a 
bonded  debt  of  some  $79,000,000.  Obligations  on  the  score  of  Government  subsidies,  and  other  debts, 
brought  its  total  list  of  liabilities  to  $236,525,000.  The  earnings  of  the  property  fell  off  sharply  in  the 
panic  year.  In  1892  it  earned  $8,550,268  net,  and  other  receipts,  amounting  to  $2,389,970,  swelled  its 
total  income  to  $10,940,238,  and  made  possible  a  surplus  of  $2,649,518  for  the  year.  In  1893,  the  road 
earned,  instead  of  a  surplus,  a  deficit  of  $432,452.  The  income  of  this  year  was  reduced  to  $7,553,469, 
composed  of  net  earnings  to  the  amount  of  $6,204,717,  and  other  receipts  aggregating  $1,348,751. 


366 


THE  NEW  YORK  STOCK  EXCHANGE 


substituted  ad  valorem  for  specific  duties.1  It  reduced  the  duty  on  refined 
sugar  from  half  a  cent  to  one  quarter  of  a  cent  a  pound.  All  industrials 
were  weakened  and  Sugar  stock  declined  about  seven  points,  to  80,  but 
the  market  rallied  immediately.  In  December  prices  were  irregular,  with 
periods  of  pronounced  weakness,  due  to  unfavorable  conditions.  The  reg¬ 
ular  session  of  Congress  had  begun  and  the  public  was  disturbed  over  the 
uncertain  tariff  outlook.  Gold  was  exported  to  Germany.  The  St.  Nicholas 
Bank,  a  State  institution,  closed  its  doors  under  unpleasant  circumstances, 
and  the  Atchison,  Topeka  &  Santa  Fe  and  New  York  &  New  England  rail¬ 
roads  went  into  the  hands  of  receivers.2  Gloom  and  depression  ushered  out 
this  terrible  year. 

In  the  years  between  the  panic  of  1893  and  the  first  McKinley  admin¬ 
istration  the  securities  market  was  highly  irregular.  It  was  under  the 
influence  of  cross  currents.  On  the  one  hand  there  was  unmistakable 
evidence  of  industrial  convalescence.  On  the  other  hand  currency  and  tariff 
problems  caused  distrust  of  the  future.  Active  speculation  was  centered 
mainly  in  shares  of  so-called  trusts,  and  manipulation  in  these  issues  was 
peculiarly  flagrant. 

It  was  in  this  period  that  the  difficult  task  of  saving  the  national  gold 
reserve  fell  to  President  Cleveland.  He  preserved  the  credit  and  fair  name 
of  the  country  by  the  only  means  available — the  issuance  of  Government 
bonds — and  for  this  action  has  been  vilified  ever  since  by  a  large  body  of 
his  fellow  partisans.  In  the  middle  of  January,  1894,  the  rapid  dwindling 
The  first  bond  treasury  reserve  brought  the  necessity  of  a  bond  issue 

issue  for  the  prominently  to  the  fore.  Secretary  Carlisle  gave  the  Senate 
protection  of  Finance  Committee  notice  that  the  reserve  had  fallen  to  about 
$74,000,000,  and  that,  unless  immediate  legislation  author¬ 
izing  him  to  issue  low  rate  bonds  were  effected,  he  would  proceed  to  issue 
such  bonds  as  the  Act  of  1875  made  possible.  Shortly  afterward,  seeing 
no  prospect  of  Congressional  assistance,  the  Administration  invited  bids 
for  five  per  cent,  bonds  to  the  amount  of  $50,000,000,  redeemable  after 

JMr.  F.  L.  Earaes,  in  “The  New  York  Stock  Exchange,”  estimates  that  in  1893  there  were  642  bank¬ 
ing  failures,  with  liabilities  of  $210,998,808 ;  15,242  commercial  failures,  with  liabilities  of  $346,779,889, 
and  receiverships  for  railway  properties  capitalized  at  $1,651,116,000  in  stocks  and  bonds,  and  compris¬ 
ing  32,379  miles  of  road. 

2  Atchison  stock  sold  at  $14  a  share  on  December  23d,  when  Joseph  W.  Reinhart  (the  president),  John 
J.  McCook,  and  Joseph  C.  Wilson  were  appointed  receivers  of  the  property.  The  Atchison  system,  which 
was  capitalized  at  $346,000,000  in  stocks  and  bonds,  comprised  9,344  miles  of  road.  In  1890  the  property 
had  been  reorganized  to  avoid  foreclosure.  For  several  years  it  had  suffered  by  being  saddled  with  other 
railroad  systems,  which  were  burdens  rather  than  aids  to  development.  In  common  with  all  other  lines, 
the  Atchison  suffered  from  the  business  depression  of  1893. 

The  New  York  &  New  England  road,  which  went  into  the  hands  of  Senator  Thomas  C.  Platt  as 
receiver,  on  December  21st,  had  been  bankrupt  in  1884  and  reorganized  in  the  following  year.  The  Read¬ 
ing  road,  prior  to  its  failure  early  in  1893,  had  acquired  a  large  block  of  New  York  &  New  England  stock 
and  sold  it  at  a  great  sacrifice.  In  December,  A.  A.  McLeod  individually  was  understood  to  be  conducting 
a  bull  pool  in  the  stock,  and  to  have  in  mind  a  project  to  extend  the  line  of  the  road  from  Brewsters, 
Connecticut,  to  New  York.  Some  one  must  have  suffered  a  fearful  loss  in  this  issue,  for  the  price  fell  from  25% 
to  12  between  December  19th  and  21st.  The  decline  was  shortly  followed  by  the  failure  of  Samuel  Heilner 
of  Philadelphia,  a  prominent  coal  dealer,  who  was  a  director  of  the  railroad. 


THE  THREAT  OF  UNSOUND  CURRENCY 


367 


ten  years,  and  named  an  upset  price  of  $117,223,  making  the  investment 
equivalent  to  a  three  per  cent,  bond  at  par.1  The  reserve  fell  below 
$66,000,000  before  February  1st,  the  day  on  which  the  bids  were  opened, 
and  the  loan  would  have  been  a  wretched  failure  but  for  the  patriotic 
action  of  a  syndicate  of  New  Y'ork  banks  and  banking  houses,  which 
took  $30,000,000  of  the  bonds  and  thus  stimulated  public  demand  for  the 
remainder.  The  gold  reserve  was  increased  by  nearly  $59,000,000,  and 
stood  at  $107,440,802  on  the  sixth  of  March. 

The  House  passed  the  Wilson  bill  in  a  radical  form  on  February  1st, 
and  the  measure  went  to  the  Senate  without  a  provision  for  sugar  duties. 
Leading  directors  of  the  American  Sugar  Refining  Company  were  in  the 
national  capital,  endeavoring  to  impress  their  ideas  of  sugar  schedules 
upon  the  minds  of  our  statesmen.  Their  efforts  were  remark¬ 
ably  successful,  and  the  results  were  soon  reflected  in  the 
stock  market,  in  which  various  prominent  Senators  began  a 
brisk  speculation.2  Sugar  common  rose  from  80%  to  85%  on  March  1st, 
and  sold  at  90  four  days  later.  On  the  sixth  the  price  opened  at  89, 
declined  a  point  and  then  ran  rapidly  up  to  par.  It  receded  to  91,  recov¬ 
ered  to  90%  and  again  fell  back,  closing  at  90%,  after  trading  to  the  extent 
of  nearly  170,000  shares.  On  the  seventh  Sugar  ran  up  to  95%,  and  the 
next  day  the  “  good  news  ”  was  out.  The  Senate  tariff  bill  was  made  public 
and  was  seen  to  include  duties  on  both  raw  and  refined  sugar. 

Extraordinary  weakness  in  the  price  of  wheat  (which  meant  hard  times 
for  the  farmer),  a  sharp  decline  in  silver  bullion,  renewal  of  gold  exports  to 
repurchase  American  securities  sold  abroad,  a  Western  rate  war  and  an 
extensive  coal  miners’  strike,  all  united  to  repress  stock  speculation  during 
the  early  part  of  1894.  However,  the  absence  of  forced  liquidation  pre¬ 
vented  a  severe  decline  in  prices.  The  great  boycott  instituted  by  the 


Tariff 

legislation. 


'These  were  bonds  authorized  by  an  Act  of  1870,  and  made  available  five  years  later  for  discretionary 
use  by  the  Secretary  of  the  Treasury,  to  maintain  the  gold  reserve.  They  were  not  of  the  most  marketable 
sort.  It  would  have  been  to  the  Government’s  advantage  to  issue  bonds  bearing  a  lower  rate  of  interest, 
but  to  do  so  a  special  act  was  necessary.  On  this  and  on  every  other  occasion,  during  the  period  in  ques¬ 
tion,  when  the  Administration  appealed  to  Congress  for  legislative  aid  in  maintaining  the  credit  of  the 
country,  the  appeal  was  ignored. 

The  type  of  bond  first  selected  was  one  of  three  authorized  by  the  Act  of  1870,  the  other  two  being  a 
four  and  a  half  per  cent,  fifteen-year  bond,  and  a  four  per  cent,  thirty-year  bond.  “The  five  per  cent,  bonds 
were  specified  in  the  Secretary’s  offer,”  says  Mr.  Cleveland,  in  an  article  on  “The  Cleveland  Bond  Issues,” 
appearing  in  the  Saturday  Evening  Post  on  May  7, 1904,  “  because  on  account  of  their  high  rate  of  interest 
they  would  command  a  greater  premium,  and  therefore  a  larger  return  of  gold,  and  for  the  further  reason 
that  the  option  of  the  Government  regarding  their  payment  could  be  earlier  exercised.” 

2The  deference  paid  to  the  sugar  magnates  by  certain  Senators,  with  whom  lay,  in  great  measure,  the 
power  to  shape  tariff  legislation,  is  a  matter  of  official  record.  The  Senate’s  handling  of  the  tariff  bill,  and 
particularly  of  the  sugar  schedule,  created  a  scandal,  which  eventually  caused  the  appointment  of  a  Senate 
investigating  committee  to  ascertain  whether  or  not  Senators  had  been  guilty  of  using 
the  advantages  of  their  positions  for  the  purpose  of  stock  speculation.  Certain  wearers  The  Senatorial 
of  the  toga  were  suspected  of  trading  legislative  favors  for  assistance  in  the  New  York  Sugar  campaign, 
stock  market.  Nothing  definite  was  ever  accomplished  by  this  committee,  except  the 
temporary  incarceration  of  one  or  two  stock  brokers  who  refused  to  answer  pertinent  questions.  How¬ 
ever,  the  actual  facts  are  that  certain  Senators  were  engaged  in  speculating  in  Sugar  stock  at  this  time 
and  that  their  ventures  made  them  handsome  profits  while  the  Senate  was  busy  with  tariff  legislation, 
and  it  is  believed  that  most  of  them  eventually  left  these  profits,  together  with  other  sums,  in  Wall  Street. 


368 


THE  NEW  YORK  STOCK  EXCHANGE 


American  Railway  Union1  began  on  June  26th,  and  lasted  till  the  middle 
of  July,  impeding  traffic  on  more  than  thirty  railroads,  injuring  general 
business  and  producing  riots  and  bloodshed.  But  it  was  not  accounted 
the  main  factor  in  such  disquietude  as  existed  in  the  stock  market. 

The  Senate  passed  a  tariff  measure  on  July  3d,  by  a  majority  of  five 
votes.  It  was  a  measure  in  which  protection  for  certain  privileged  interests 
was  dominant  and  the  principle  of  free  raw  material  was  utterly  obscured. 
The  authors  of  this  transformation  of  the  Wilson  bill  were  bitterly 
denounced,  but  the  House  had  either  to  accept  the  Senate’s  dictum  or  get 
no  tariff  enactment  of  any  sort.  After  six  weeks  of  angry  debate  the  House 
passed  the  Senate  bill,  and  the  President  permitted  it  to  be- 
eharpiyin  come  a  law  without  his  signature.2  Throughout  the  country 
August.  the  feeling  was  one  of  intense  relief  that  the  measure  had  been 

settled.  August  witnessed  an  excited  rise  in  stocks — despite 
news  of  a  failure  of  the  corn  crop.  The  business  of  the  country  began 
slowly  to  improve,  though  heavy  bank  reserves  still  showed  a  poor  com¬ 
mercial  demand  for  capital. 

It  was  only  for  a  brief  moment  that  hope  irradiated  the  gloom.  Free 
silver  agitators  were  busy  in  fanning  the  popular  discontent  which  adver¬ 
sity  had  caused,  and  fear  of  national  insolvency  induced  the  hoarding  of 
gold  in  this  country.  Despite  a  large  trade  balance  in  our  favor,  exports 
of  the  metal  were  renewed.  Once  more  the  reserve  began  to  melt  rapidly 
away  and  the  stock  market  to  show  heaviness.  One  after  another  the 
dividends  of  the  Rock  Island,  Baltimore  &  Ohio,  and  Burlington  roads  were 
cut.  The  December  wheat  option  fell  below  52  cents  in  October,  and  cotton 
sold  at  5%  cents  a  pound.  Disorganization  of  the  coal  trade  induced  a 
bear  campaign  against  the  anthracite  coal  carriers,  which  lasted  several 
months  and  was  highly  effective.  In  November,  1894,  the  reserve  standing 
at  about  $62,000,000,  the  Administration  again  invited  bids  for  five 


Eugene  V.  Debs  (nominated  for  the  Presidency  of  the  Unit  ed  States  by  the  Socialists,  ten  years  later) 
was  at  the  head  of  this  union  in  1894  and  managed  this  boycott,  which  was  directed  against  the  Pullman 
Palace  Car  Company,  and  affected  the  railroads  using  the  cars  of  this  concern.  These  roads  included  the 
Atchison,  Northern  Pacific,  Illinois  Central,  Lake  Shore,  Southern  Pacific,  St.  Paul,  Chi- 
Federal  troops  cago  &  Northwest,  Baltimore  &  Ohio,  “Panhandle”  and  Rock  Island  among  others, 
used  to  suppress  When  the  running  of  trains  with  non-union  men  instigated  violence,  President  Cleveland 
disorder.  called  out  troops  to  protect  bankrupt  roads,  which,  being  in  the  hands  of  receivers 

appointed  by  United  States  courts,  were  under  Federal  protection.  He  also  sent  troops 
to  Chicago  to  disperse  mobs  which  interfered  with  the  carrying  of  the  United  States  mails,  and  from  July 
5th  to  July  18th  they  were  used  to  uphold  law  and  order  in  that  city.  Bloodshed  took  place  in  various 
parts  of  the  country  and  business  was  much  crippled  by  the  tying  up  of  traffic.  Debs  and  several  others 
were  indicted,  on  July  10th,  for  conspiracy  to  obstruct  the  mails.  The  boycott  went  to  pieces  soon  after¬ 
ward.  Mr.  Debs  was  incarcerated  and  obtained  his  freedom  only  after  a  protracted  period  of  litigation. 

2Mr.  Cleveland’s  disgust  with  the  Senate  was  profound.  He  expressed  it  on  August  27th,  in  a  letter 
to  Representative  Catchings  of  Mississippi,  of  which  the  following  sentence  became  famous:  “I  take  my 
place  with  the  rank  and  file  of  the  Democratic  party  who  believe  in  tariff  reform  and  who  know  what  it  is, 
who  refuse  to  accept  the  results  embodied  in  this  bill  as  the  close  of  the  war,  who  are  not  blinded  to  the 
fact  that  the  livery  of  Democratic  tariff  reform  has  been  stolen  and  worn  in  the  service  of  Republican  pro¬ 
tection,  and  who  have  marked  the  places  where  the  deadly  blight  of  treason  has  blasted  the  councils  of  the 
brave  in  their  hour  of  might.” 


THE  THREAT  OF  UNSOUND  CURRENCY 


369 


Confidence 
shaken 
once  more. 


per  cent,  bonds  to  the  amount  of  $50,000,000,  and  accepted  a  bid  of 
$117,077  for  the  entire  issue,  made  by  a  New  York  financial  syndicate. 
The  replenishment  of  the  reserve  afforded  a  merely  temporary 
relief,  for  withdrawals  from  the  Treasury  increased  at  a  fright¬ 
ful  rate.  They  aggregated  $172,000,000  in  1894,  and  of  this 
amount  $69,000,000  was  taken  out  in  the  last  two  months  of 
the  year.  In  his  message  to  Congress  on  January  28,  1895,  President 
Cleveland  appealed,  in  language  at  once  forceful  and  considerate,  for  legisla¬ 
tive  relief— the  authorization  of  longterm,  low  rate  bonds,  to  be  used  in  main¬ 
taining  the  gold  reserve  and  in  exchange  for  currency  notes,  which  could 
thus  be  redeemed  and  cancelled.  The  reserve  had  fallen  to  $56,000,000,  a 
little  more  than  a  tenth  of  the  Government’s  outstanding  currency  notes 
of  all  descriptions.  With  the  continuance  of  conditions  then  existing,  it 
would  take  less  than  two  months  to  make  this  country  a  bankrupt  nation, 
and  a  helpless  victim  of  adversity  such  as  Americans  had  never  before 
endured.  These  terrible  facts  the  great  body  of  inflationists  that  appeared 
to  dominate  Congress  seemed  incapable  of  grasping.  The  President’s 
appeal  was  without  effect. 

Mr.  Cleveland  waited  a  few  days,  and  then  prayer  gave  way  to 
action.  On  February  8th — following  a  consultation  at  the  White  House 
with  J.  Pierpont  Morgan— he  caused  the  announcement  that 
the  Government  had  agreed  to  purchase  a  little  more  than 
$65,000,000  in  gold  with  four  per  cent.,  thirty  year  bonds, 
to  the  amount  of  about  $62,400,000.1  At  this  time  the 
Treasury  reserve  contained  $41,340,181. 

The  Morgan-Belmont  syndicate,  which  had  struck  this  bargain  with 
the  Government,  obtained  the  bonds  at  less  than  104%  and  resold  the 
entire  issue  in  February  at  112%,  thereby  greatly  enraging  the  free  silver 
party  all  through  the  country.  But  it  agreed  to  perform  certain  services 
the  value  of  which  can  scarcely  be  estimated  with  accuracy.  It  contracted 
to  procure  half  of  the  required  metal  from  abroad  and  the  remainder  from 
other  sources  than  the  Treasury  reserve,  and,  moreover,  to  “exert  all  financial 


The  bond 
contract  of 
February,  1894. 


1  The  syndicate  making  this  bargain  with  the  Government  consisted  of  J.  P.  Morgan  &  Co.  (which  firm 
had  been  organized  on  January  1st,  succeeding  Drexel,  Morgan  &  Co.),  acting  for  J.  S.  Morgan  &  Co.,  of 
London,  and  themselves,  and  August  Belmont  &  Co.,  acting  for  N.  M.  Rothschild  &  Co.  and  themselves. 
Much  of  the  indignation  aroused  among  silver  men  by  this  transaction  was  based  upon 
the  foreign  participation  in  it.  According  to  the  terms  of  the  agreement  the  syndicate  Terms  of  the 
were  to  furnish  the  Government  3,500,000  ounces  of  standard  gold  coin,  to  be  paid  for  bond  contract, 
at  the  rate  of  $17.80441  an  ounce  in  four  per  cent  bonds,  redeemable  at  the  Government’s 
pleasure  after  thirty  years.  Fixing  this  price  for  the  gold  was  equivalent  to  paying  about  104.4946  for 
the  bonds.  Mr.  Cleveland  gives  the  aggregate  of  the  bonds  issued  in  the  carrying  out  of  this  contract  at 
$62,315,400  and  the  total  of  gold  thus  purchased  as  $65,116,244.62.  The  agreement  provided  that  at 
least  half  of  the  gold  furnished  should  be  shipped  from  abroad  in  amounts  of  not  less  than  300,000  ounces 
a  month,  and  that  the  syndicate  should  have  the  first  call  on  any  additional  bonds  issued  before  October  1st. 
As  it  happened,  there  was  no  further  bond  issue  before  that  date.  None  of  the  gold  supplied  was  to  betaken 
from  the  Treasury  reserve.  The  bonds  were  to  be  delivered  from  time  to  time  as  the  coin  was  presented  at 
legal  depositories  of  the  United  States. 

By  the  purchase  of  bonds  on  these  terms  the  syndicate  obtained  what  was  virtually  a  3.75  per  cent, 
investment  in  Government  funds. 


370 


THE  NEW  YORK  STOCK  EXCHANGE 


influence  and  make  all  legitimate  efforts”  to  protect  the  Treasury  from 
gold  withdrawals  during  the  life  of  the  contract.  The  latter  stipulation  it 
was  able  to  fulfil  by  selling  foreign  exchange  at  figures  that  made  it 
unprofitable  to  export  gold.  For  months  after  the  contract  had  been  carried 
out — which  was  in  June — the  syndicate  voluntarily  extended  this  protection 
to  the  Treasury.  It  would  have  been  highly  acceptable  to  the  bankers  to 
substitute  a  three  per  cent,  gold  bond  at  par  for  the  coin  bond  named  in 
the  bargain,  and  the  President  informed  Congress  that  this  change  could  be 
made  and  would  save  the  Government  $16,000,000  in  interest.  The  requi¬ 
site  legislation  was  not  obtainable. 

Weakness  lingered  in  the  stock  market  while  Congress  remained  in  ses¬ 
sion.  News  of  that  body’s  adjournment,  March  4th,  was  greeted  with 
cheers  on  the  floor  of  the  Exchange.  That  very  day  there 
stocks  recover  began  a  vigorous  bull  movement  wdiich  bore  witness  to  relief  at 
adjournment  of  h°me  and  abroad.  It  did  not  culminate  till  unfavorable  crop 
Congress.  reports  reached  the  city  in  the  latter  part  of  May.  The  cam¬ 

paign  was  justified  by  a  certain  amount  of  business  improve¬ 
ment,  showed  in  renewed  activity  at  mills  and  furnaces,  and  rising  wages. 
But  it  went  too  far,  particularly  in  industrial  issues,  and  the  result  was  a 
violent  reaction  late  in  June.  Between  the  27th  and  29th  of  this  month, 
Sugar  fell  from  113%  to  100%,  Chicago  Gas  from  71%  to  60,  and  American 
Tobacco  from  114%  to  107,  while  the  general  list  suffered  somewhat  less. 


apj 

M 


RENEWAL  of  the  gold  efflux  this  summer  checked  the  market’s 
tendency  to  advance.  In  its  efforts  to  prevent  this  very  misfortune 
the  bond  syndicate  apparently  had  oversold  exchange,  expecting 
to  cover  when  the  year’s  wheat  and  cotton  bills  should  come  into  the 
market.  But  these  bills  proved  too  scanty,  for  the  winter  wheat  crop  had 
been  small  and  both  the  spring  wheat  and  cotton  crops  were  extremely 
late.  The  situation  kept  sterling  rates  high  and  the  heavy  outflow  of  gold 
rendered  the  market  vulnerable.  The  Venezuelan  crisis,  which  came  with 
great  suddenness  at  this  period,  carried  ruin  to  many  a  speculator. 

In  his  annual  message  to  Congress,  on  December  3rd,  President  Cleve¬ 
land  gave  news  of  a  demand  which  had  been  made  by  this  country  upon 
Great  Britain  to  arbitrate  a  dispute  in  which  she  was  engaged  with  Vene¬ 
zuela,  in  reference  to  the  boundary  line  between  that  republic  and  British 
Guiana.  A  large  portion  of  the  territory  affected  had  been  in 
The  the  uninterrupted  possession  of  Great  Britain  and  of  Holland 

"V  enezuelvn 

imbroglio.  (by  whom  it  was  ceded  to  Great  Britain)  for  two  centuries. 

In  respect  of  this  portion  the  British  Government  would  not 
entertain  the  idea  of  arbitration,  and  refusal  to  do  so  was  regarded  by  Mr. 


THE  THREAT  OF  UNSOUND  CURRENCY 


371 


Cleveland  as  a  menace  to  the  Monroe  doctrine.  The  first  public  intimation 
that  serious  trouble  might  arise  out  of  this  controversy  was  contained  in  a 
second  message  which  the  President  forwarded  to  Congress  on  Tuesday, 
December  17tli,  announcing  that  the  American  proposals  had  been  rejected, 
and  requesting  Congress  to  authorize  a  commission  which  should  determine 
the  true  boundary  line  and  Venezuela’s  rights.  He  plainly  declared  his 
belief  that  after  such  determination  had  been  made  it  would  be  our  duty 
to  resist  British  aggression  to  the  utmost. 

This  was  tantamount  to  a  promise  of  war  in  the  event  of  Great  Britain’s 
refusal  to  accept  our  view  of  the  case.  The  news  of  the  message  reached 
the  market  in  the  afternoon  of  that  day,  and  stocks  sharply  declined. 
Congress  enthusiastically  responded  to  the  President’s  call,  and  passed  a 
measure  appropriating  $100,000  for  the  expenses  of  such  a  commission  as 
he  named.1  The  fear  of  war  communicated  a  severe  shock  to  financial  cen¬ 
ters  both  here  and  abroad.  The  market  weakened  rapidly  and  on  Friday, 
the  20th,  the  selling  movement  ran  into  a  panic,  stocks 
dropping  from  five  to  ten  points  and  call  money  running  up  :^har  scare 

to  ninety  per  cent.,  stimulated  by  a  report  that  London  was  stock  market, 

to  withdraw  her  American  credits.  The  Central  Trust  Com¬ 
pany  broke  the  call  rate  this  day  by  offering  funds  at  from  five  to  two  per 
cent.,  and  the  panic  was  checked  after  three  Stock  Exchange  firms  had  been 
forced  to  suspend.  Between  Monday  and  Friday  of  this  week  Sugar  fell 
from  104  to  92,  Tobacco  from  75%  to  68%,  St.  Paul  from  75%  to  62%, 
General  Electric  from  31%  to  20,  Louisville  &  Nashville  from  53%  to  39,  and 
New  York  Central  from  100%  to  91%,  while  various  other  issues  suffered 
equal  losses.  Prevalent  anxiety  was  heightened  by  the  rapid  diminution 
of  the  gold  reserve,  and  after  a  rally  there  was  a  fresh  break  on  Saturday. 
On  December  23rd  the  news  that  the  President  had  determined  on  a  fresh 
bond  issue,  and  the  authorization  of  loan  certificates  by  the  Clearing  House, 
checked  the  demoralization,  and  the  market  rose  sharply.  The  Venezuelan 
thunderstorm  swept  through  Wall  Street  with  devastating  effect  and  swept 
out  again  as  suddenly  as  it  had  come. 

On  January  5,  1896,  Mr.  Carlisle  invited  proposals  for  $100,000,000  of 
four  per  cent,  thirty  year  bonds,  and  when  the  bids  were  opened  a  month 
later  the  issue  was  six  times  over  subscribed.  About  one-third  of  the 
bonds  went  to  a  syndicate  organized  by  J.  Pierpont  Morgan,  at 
110.6877,  and  the  remainder  to  other  bidders,  at  higher  figures.  The 
gold  reserve  was  replenished  and  since  that  occasion  has  never  been  in 
very  serious  peril. 

1  The  commission  appointed  consisted  of  Justice  David  J.  Brewer  of  the  Supreme  Court,  Chief  Justice 
Alvey  of  the  Court  of  Appeals  of  the  District  of  Columbia,  Andrew  D.  White,  Frederick  R.  Coudert,  and 
Daniel  C.  Gilman.  Months  were  consumed  before  the  matter  was  peacefully  settled,  but  it  ceased  to  be  an 
important  market  factor  after  the  panic  of  December,  1895. 


372 


THE  NEW  YORK  STOCK  EXCHANGE 


campaign 
of  1896. 


®T  was  in  the  political  campaign  of  1896  that  the  inflationists  of  the 
country  met  their  most  crushing  defeat  and  confidence  in  our  finan¬ 
cial  integrity  was  most  firmly  established.  The  free  silver  agitation, 
which  business  men  recall  with  shudders,  was  effective  in  injuring  stock 
values  very  early  in  the  year.  The  brief  era  of  good  feeling  promoted  by 
the  success  of  the  government  loan  ended  when  the  great 
The  free  silver  Baltimore  &  Ohio  road  went  into  the  hands  of  receivers,1  the 
stock  tumbling  from  35%  to  16%  in  a  week.  As  the  months 
went  by  and  the  sixteen-to-one  mania  spread  through  every 
State,  a  species  of  paralysis  seized  upon  trade.  Bank  clearings  and  railway 
earnings  dwindled  away,  the  prices  of  textiles  and  iron  and  steel  crept 
lower  and  lower,  the  controllers  of  capital  tightened  their  grip  upon  it  and 
anxious  merchants  offered  their  paper  at  twelve  and  fifteen  per  cent, 
discount.  As  credit  contracted,  mills  and  factories  shut  down.  The  clerks 
and  operators,  looking  in  vain  for  work,  and  the  farmer,  burdened  with 
mortgage  obligations  and  suffering  from  the  low  prices  of  grain,  joined 
the  great  army  of  discontent.  Each  day  new  lips  shaped  the  cry  that 
the  money  power  was  ruining  the  country,  and  new  recruits  repaired  to 
the  standard  of  fifty-cent  dollars. 

Naturally,  the  course  of  the  stock  market  was  downward  and  the 
movement  rapid.  In  mid-June  when  the  Republicans  held  their  National 
Convention  at  St.  Louis,  nominated  William  McKinley  for  the  Presidency 
and  declared  for  the  gold  standard,  prices  rallied  briefly.  But  as  one 
Democratic  State  Convention  after  another  declared  for  free  silver,  con¬ 
fidence  ebbed  away  and  the  bears  repeated  their  triumphs. 

The  Democratic  party  met  in  National  Convention,  at  Chicago,  on  July 
7th,  and  the  silver  faction  was  at  once  seen  to  be  in  control.  Two  days 
later  a  young  Nebraskan — William  Jennings  Bryan — who  had  earned 
some  reputation  for  oratory  in  Congress  and  had  made  a 
religion  of  free  silver,  replied  to  a  speech  on  behalf  of  the 
gold  standard  made  by  Senator  Hill  of  New  York.  Of  his 
deliverance  it  may  simply  be  said  that  it  wrought  the  free 
silver  party  into  a  passion  of  enthusiasm  and  earned  Mr. 
Bryan  the  nomination  for  the  Presidency.  Stocks  rallied  after  his  selection 
as  standard  bearer  for  the  inflationists,  on  the  theory  that  he  would  be 
“an  easy  man  to  beat.”  But  in  the  following  week  heavy  liquidation  set 
in,  and  fresh  gold  exports  carried  the  Treasury  reserve  again  below  the 
point  of  reputed  safety. 

Late  in  July  the  bankers  of  New  York  met  the  crisis  by  forming  an 
association  to  protect  the  reserve.  They  supplied  $25,000,000  in  gold  to 
the  Treasury  and  agreed  to  furnish  sterling  exchange  to  the  amount  of 

1  The  receivers  appointed  were  John  K.  Cowen,  president  of  the  road,  and  Oscar  G.  Murray. 


Mr.  Bryan  is 
nominated  for 
the  Presidency 
and  the  “Bryan 
panic”  begins. 


THE  THREAT  OF  UNSOUND  CURRENCY 


373 


£10,000,000  and  sterling  loans  to  the  amount  of  £5,000,000,  if  necessary. 
The  result  was  an  immediate  stoppage  of  the  drain  upon  the  reserve. 
Early  in  August  the  panic  culminated,  and  at  a  time  when  commercial 
failures  were  multiplying,  and  looms  and  furnaces  ceasing  to  be  active,  the 
market  began  to  rise.  The  unnatural  exports  of  gold 1  were  succeeded  by 
an  influx  of  the  metal,  which  amounted  to  $45,000,000  in  two  months 
time.  The  Gold  Democrats  formed  a  party  of  their  own,  nominating 
General  John  M.  Palmer,  of  Illinois,  for  the  Presidency,  and  the  Republicans 
began  an  aggressive  canvass  which  promised  success.  In  September  they 
scored  overwhelming  victories  at  the  State  elections  of  Vermont  and  Maine. 
The  following  month  saw  a  sharp  rise  in  wheat,  due  to  the  failure  of  foreign 
crops,  and  this  promised  moderation  of  the  farmer’s  discontent.  Steadily 
the  rising  values  of  securities  drove  the  bears  to  cover,  as  the  conviction 
gained  that  the  country  would  be  saved  from  wretchedness  and  disgrace. 
On  November  2d,  the  day  before  election,  with  call  money  at  ninety-six  per 
cent.,  and  gold  at  a  cent  and  a  quarter  premium,  the  stock  market  soared 
like  a  released  balloon. 

The  people  decided  against  the  inflationists  by  a  splendidly  decisive 
vote,  and  the  business  community  awoke  on  Wednesday  to  a  sense  of 
salvation  from  a  fate  which  it  had  dreaded  to  picture.  London  prices 
came  three  to  four  points  up  this  day  and  the  New  York  market  opened 
correspondingly  high. 2  But  Wall  Street,  true  to  its  traditions,  had 
discounted  the  election,  and  prices,  which  had  risen  violently  while  the 
country  still  groped  in  the  dark,  sagged  through  the  remainder  of  the  year, 
now  that  the  future  had  grown  bright  with  hope. 

1  The  trade  balance  at  this  time  was  largely  in  our  favor  and  the  rise  of  exchange  to  the  gold  export 
point  was  due  simply  to  the  free  silver  scare.  Men  who  feared  that  the  value  of  their  capital  might  be  cut 
in  two  by  the  enactment  of  a  free  silver  measure,  converted  money  into  sterling  exchange,  which  was  the 
equivalent  of  gold.  This  was  quite  as  effective  a  measure  of  protection  as  drawing  gold  from  the  Treasury. 
The  free  supply  of  exchange  by  the  bankers  reversed  the  direction  of  the  gold  current. 


’Following  is 
recovery :  — 

a  table  indicating  the 

course  of  the  “ 

Bryan  panic” 

of  1896  and  the  subsequent 

Stock. 

High,  April  28. 

High,  June  17. 

Low,  July,  9. 

Low,  Aug.  8. 

High,  Nov.  4. 

American  Sugar,  . 

.  •  125% 

123% 

107% 

95% 

125 

Chic.,  B.  &  0., 

.  .  82% 

80% 

71% 

53% 

81 

Chic.,  M.  &  St.  P., 

.  •  79% 

79% 

74 

60% 

80 

Chic.,  R.  I.  &  P.,  . 

•  •  73% 

72% 

61% 

49% 

71 

Chic.  Gas, 

.  .  69% 

69% 

56% 

44% 

75% 

Gen.  Elec., 

.  .  37% 

33% 

25% 

21% 

32 

Louis.  &  N.,  . 

.  .  53% 

52% 

48 

38% 

51 

Mo.  Pac., 

.  .  28% 

24% 

20% 

15% 

25% 

XXYI 


THE  INFLUENCE  OF  A  FOREIGN  WAR 


HILE  McKinley’s  succession  to  the  Presidency  marked  the 
return  of  prosperous  times,  it  required  the  advent  of  a 
calamity — the  war  with  Spain — to  initiate  the  country’s 
most  notable  period  of  commercial  advancement.  One  of 
the  paradoxes  of  our  industrial  annals  became  evident. 
For  a  year  the  portents  of  this  conflict  agitated  our 
people.  The  thought  of  war  was  ever  present  amid  the  plans  and  schemes 
of  the  financier,  and  sober  business  men  viewed  its  possibility  with  some¬ 
thing  akin  to  dread.  Stock  values  melted  upon  its  near  approach.  The 
long  suspense  was  ended  at  last  by  the  breaking  of  our  relations  with 
Spain.  Fear  gave  way  to  satisfaction.  The  test  of  battle  taught  Ameri¬ 
cans  to  understand  America,  and  the  roar  of  guns  in  Manila  Bay,  which 
introduced  a  new  world  power,  likewise  revealed  a  new  commercial  giant. 

War,  however  just  or  inevitable  it  may  appear,  can  scarcely  be 
regarded  as  anything  but  calamitous.  Economically  considered,  it  means 
the  alienation  of  workers  from  employment  and  the  destruction  of  prop¬ 
erty.  Yet  both  the  Civil  and  the  Spanish  wars  were  followed  by  times 
of  active  trade.  The  prosperity  of  the  sixties  was  rooted  in  a  debased 
currency,  and  the  wretched  character  of  the  soil  produced  its  due  results  in 
1873.  But  the  seeds  of  the  industrial  expansion  which  began 
The  causes  of  a  quarter  of  a  century  later  were  sown  in  better  ground. 

We  had  been  husbanding  our  resources  and  awaiting  our 
opportunity  for  six  patient  years.  The  whole  country  was 
preaching  economy,  cutting  down  expenses,  talking  hard  times  and  worry¬ 
ing  over  the  money  question.  At  length  the  turn  in  the  road  was  reached. 
Decreasing  imports  and  fair  harvests  had  created  a  trade  balance  favorable 
to  the  United  States ;  the  thrift-loving  classes  of  the  population  were  again 
in  possession  of  surplus  funds;  the  perils  of  the  “endless  chain”  and  the 
menace  of  free  silver  were  no  longer  productive  of  anxiety.  Yet  the  people 


our  great 
prosperity. 


THE  INFLUENCE  OF  A  FOREIGN  WAR 


375 


were  still  timid,  still  distrustful,  still  mindful  of  recent  misfortunes  and 
ignorant  of  their  strength.  The  manufacturer  and  the  merchant,  uncertain 
of  their  market,  hesitated  to  extend  their  lines.  Into  this  situation  of 
distrust  the  war  threw  a  new  element — that  of  a  sudden,  extraordinary 
demand  for  the  products  of  furnace  and  mill.  The  effect  was  powerful  and 
the  response  immediate. 

Of  course,  the  mere  fact  that  the  Government  was  a  good  customer  of 
the  people  during  the  war,  and  afterward  spent  large  sums  in  the  Antilles 
and  the  Philippines,  and  in  the  enlargement  of  the  Navy,  could  not  produce 
and  sustain  good  times.  These  expenditures  afforded  a  stimulus  to  trade, 
and  sound  basic  conditions  enabled  it  to  flourish.  One  good  harvest 
succeeded  another  in  this  country,  while  deficiency  in  European  crops  raised 
the  prices  of  the  American  farmer’s  grain  and  multiplied  his  purchasing 
power. 

The  Bryan  inflationists  saw  a  treasured  argument  brought  to  naught 
when  a  rise  in  the  value  of  wheat  became  coincident  with  a  fall  in  the  value 
of  silver,  and  the  visible  weakening  of  the  free-silver  movement  „ 

.  0  cii  The  farmer 

inspired  capital  with  confidence.  The  enactment  of  a  high  turns  from 

protective  tariff  increased  the  manufacturer’s  profits.  More-  the  Free 

over,  the  effects  of  bountiful  crops,  of  restored  coufidence  and  Sllver  shnne' 
a  satisfactory  tariff,  were  supplemented  by  a  momentous  increase  in  the 
world’s  gold  production.  The  rush  of  gold  seekers  to  the  Klondike  began 
in  1897,  and  has  since  resulted  in  great  annual  additions  to  the  wealth  of 
America.  The  generous  output  of  the  Transvaal  in  succeeding  years  also 
swelled  the  volume  of  money  available  for  the  world’s  use,  so  that  the 
plenitude  of  currency  stimulated  the  prices  of  staples  and  favored  the 
development  of  trade. 

Under  the  influence  of  these  diverse  and  powerful  factors,  the  country’s 
gain  in  wealth  surpassed  all  precedent.  The  farmer  began  to  rid  himself 
of  the  mortgage  beneath  which  he  had  staggered  for  years,  while  the  clerk 
and  mechanic  saw  the  return  of  large  opportunity  for  employment. 

To  the  merchant  and  manufacturer  the  revival  of  prosperity  brought 
fortune  hitherto  unknown.  A  collateral  result  of  the  change  was  the 
creation  in  the  public’s  hands  of  a  large  surplus  fund,  available  for  pure 
speculation  or  for  speculative  investment.  This  situation  .  , 

r  t  ,  New  funds 

provoked  a  renewal  of  the  trust  movement  which  had  been  available  for 
checked  by  the  panic  of  1893.  Manufacturing  concerns  were  speculation  and 
united  into  corporations,  which  m  turn  were  combined  m 
larger  ones,  with  capitalizations  running  into  billions  of  dollars.  The  old 
trick  of  watering  stock  to  pay  insiders’  profits  and  foisting  inflated  securi¬ 
ties  on  the  public  was  vigorously  pressed  into  use.  Such  securities  found  a 
legion  of  eager  buyers,  now  ready  to  forget  the  hard  lessons  of  less  happy 


376 


THE  NEW  YORK  STOCK  EXCHANGE 


times  and  willing  to  believe  that  fortune  waited  just  around  the  corner.  It 
was  an  easy  matter  for  the  shrewd  promoter  or  -  manipulator  to  fill  his 
pockets  out  of  this  large  coffer  of  opportunity.  Just  as  a  class  of 
millionaires  had  arisen  with  the  Civil  War,  so  a  class  of  “multi-millionaires” 
appeared  in  these  later  and  more  opulent  days. 

During  the  early  part  of  1897  the  evidence  of  growing  hostility  toward 
Spain  among  our  countrymen  was  unmistakable.  The  accounts  of  Spanish 
Spanish  brutality  brutality  m  Cuba,  and  particularly  of  the  murder  of  an 
in  Cuba  breeds  American  citizen,  Dr.  Ricardo  Ruiz,  in  the  Guanabacoa  jail, 
hostility  in  created  a  strong  desire  to  deal  retribution  to  the  authors 

of  this  wanton  cruelty  and  bloodshed.  But  the  traders  in 
securities  treated  the  war  danger  as  remote.  The  market  advanced  in 
January  and,  though  somewhat  irregular  in  the  following  month,  showed 
no  great  disposition  to  weakness  until  the  rendering  by  the  Supreme  Court, 
on  March  22d,  of  a  decision  which  stamped  railroad  pools  as  illegal.1  This 
caused  a  decline  in  the  general  list,  lasting  several  days.  A  subsequent 
recovery  was  followed  by  a  further  decline  in  mid-April,  upon  the  outbreak 
of  war  between  Turkey  and  Greece,  which  had  been  quarrelling  for  some 
time  over  Crete.  The  Powers  united  to  stop  these  hostilities  after  about 
a  month  of  fighting,  in  which  the  Ottoman  was  easily  victorious.  In  May 
there  were  some  exports  of  gold,  but  the  market  contained  no  possibilities 
of  further  liquidation  and  prices  held  firm.  Even  the  Senate’s  action  in 
recognizing  Cuban  belligerency  was  of  slight  effect.  Toward  the  latter  part 
of  this  month  the  Supreme  Court  handed  down  another  important  decision, 
this  time  bringing  joy  to  discouraged  holders  of  securities.  The  Court  held 
that  the  Interstate  Commerce  Commission  had  no  right  to  prescribe 
railroad  rates. 

This  pronunciamento  inaugurated  an  advance  in  the  market  for  which 
conditions  were  already  ripe.  The  movement  lasted  four  months  without 
a  noteworthy  setback,  despite  persistent  selling  of  foreign  holders,  who 
lacked  faith  in  the  future  of  American  prosperity,  and  despite  one  or  two 
unfavorable  events,  such  as  an  extensive  coal  miners’  strike.  Agitation 
over  the  Dingley  tariff  bill  was  not  very  effective  in  disturbing 
the^ingiey0*  market,  but  the  final  debates  on  the  measure  did  act  as  a 

Tariff.  check  upon  speculation.  Of  course  there  was  no  such  public 

uncertainty  touching  the  nature  of  the  coming  tariff  legis¬ 
lation  as  existed  while  the  Wilson  bill,  for  instance,  was  in  process  of 
formation.  Mr.  McKinley  had  been  elected  on  a  platform  declaring  most 

1  This  decision  was  handed  down  in  the  case  of  the  United  States  versus  the  Trans-Missouri  Freight 
Association,— a  league  which  comprised  eighteen  railroads  and  was  a  part  of  the  Transcontinental  Traffic 
Association,  a  body  operating  in  the  far  West  and  Northwest  and  with  ramifications  elsewhere.  Further¬ 
more,  the  Joint  Traffic  Association, — covering  the  territory  east  of  the  Mississippi  and  south  of  the 
Ohio,— the  Southern  Railway  and  Steamship  Association,  and  the  Western  and  Southwestern  Traffic 
Associations  were  similarly  affecoed. 


THE  INFLUENCE  OF  A  FOREIGN  WAR 


377 


unmistakably  for  protection.  At  that  time  he  was  the  veritable  high  priest 
of  this  political  faith.  His  inaugural  address  made  plain  his  intention  to 
carry  out  immediately  the  wishes  of  his  party.  When  Congress,  responsive 
to  his  call,  met  in  special  session  on  March  15th  to  enact  a  new  tariff,  the 
country  was  perfectly  aware  that  the  new  administration’s  policy  would 
have  full  and  hearty  support.  Nevertheless,  the  Senate  maintained  its  role 
of  dictator,  and  when  the  tariff  bill  came  to  its  hands  from  the  House,  early 
in  July,  it  altered  the  form  of  the  measure  as  it  pleased,  and  compelled  the 
lower  body  to  acquiescence.  On  July  24th  the  President’s  signature  made 
the  new  tariff  the  law  of  the  land. 

The  principal  change  forced  by  the  Senate  was  in  the  sugar  schedule. 
The  American  Sugar  Refining  Company  had  prior  knowledge  of  the  form 
this  schedule  was  to  take,  a  fact  which  enabled  it  to  save  large  duty  pay¬ 
ments  by  the  quick  importation  of  quantities  of  the  raw  staple.  A  heavy 
bull  speculation  in  Sugar  shares,  carrying  their  price  from  130  to  146, 
marked  the  last  of  the  tariff  debate.  The  advancing  movement  in  the 
general  list  became  an  actual  boom  in  late  July  and  August.  Such  rises 
were  noted  as  that  of  Consolidated  Gas,  from  170%  to  19614,  in  the  week 
ending  August  4th,  during  which  the  news  was  made  public  that  the 
company  had  absorbed  various  smaller  rivals. 

The  speculative  spirit  was  not  confined  to  stocks.  Under  the  leadership 
of  young  Joseph  Leiter,  whose  indulgent  father  had  enabled  him  to  start 
a  disastrous  gambling  venture,  wheat  options  in  Chicago  and 
this  city  were  soaring.  In  the  three  weeks  ending  August 
21st,  the  September  options  in  Chicago  rose  from  74%  cents 
to  a  dollar  a  bushel.  Many,  who  had  little  to  risk  in  the  wheat  pit  or  the 
stock  market,  threw  their  lives  into  a  still  swifter  game  of  chance,  and  the 
rush  of  gold  seekers  to  the  Klondike  drained  city  and  hamlet.  Along  with 
this  venturesome  spirit  existed  the  more  desirable  sentiment  of  renewed 
confidence  among  manufacturers  and  merchants.  Commercial  buyers 
invaded  the  city  in  hosts.  The  cotton  mill  and  the  furnace  pulsated  with 
new  life.  The  Kansas  farmers,  rejoicing  at  the  high  prices  of  grain,  held 
a  festival  to  celebrate  prosperity’s  return. 

In  September,  the  year’s  stock  market  rise  reached  its  culmination, 
St.  Paul  crossing  par  and  Sugar  selling  at  159,  while  Consolidated  Gas 
rose  from  193  to  241%  and  fell  back  to  215  in  about  a  week.  Toward  the 
end  of  this  month  a  mild  yellow  fever  scare  provoked  a  reaction,  and  the 
bears  were  in  the  lead  during  October,  despite  increased  railway  earnings, 
better  consumption  of  pig  iron  and  some  importation  of  gold. 

The  period  had  now  been  reached  when  the  stock  market  could  no 
longer  ignore  the  war  cloud.  Throughout  the  remainder  of  this  year 
speculation  for  the  rise  was  lifeless,  save  in  the  wheat  pit,  where  young 


The  Leiter 
wheat  deal. 


378 


THE  NEW  YORK  STOCK  EXCHANGE 


Leiter  won  a  temporary  victory  by  closing  his  December  contracts  at 
good  prices.  Each  incident  which  seemed  to  bring  nearer  a  rupture  with 
Spain — like  the  public  declaration  of  ex-Minister  Hannis 
Fear  °k  t  factor  TaYlor  that  only  by  our  intervention  could  peace  be  restored 
at  last.  in  Cuba — depressed  stock  quotations.  Recoveries  were  stimu¬ 

lated  by  the  Spanish  Government’s  proclamation  of  Cuban 
autonomy  late  in  November  and  by  President  McKinley’s  first  annual 
message  to  Congress.  The  President  was  determined  to  maintain  peace  if 
it  were  possible,  and  his  attitude  did  much  to  re-assure  the  timid.  How¬ 
ever,  he  was  compelled,  by  rioting  in  Havana,  to  send  the  second-class 
battleship  Maine  to  that  port  in  January,  and  the  putative  friendliness  of 
the  visit  did  not  allay  the  current  disquietude.  Not  only  the  ticker  but  the 
counting-room  and  the  shop  began  to  show  evidence  of  a  returning  public 
distrust,  and  proprietors  of  New  England  cotton  mills  cut  down  the  wages 
of  their  operatives.  The  publication  of  an  imprudent  private  letter  by 
Senor  Enrique  Dupuy  de  Lome  to  a  friend,  in  which  the  Spanish  Minister 
lampooned  McKinley,  increased  the  strain  upon  our  friendly  relations  with 
Spain.  Still  the  market  showed  periods  of  intermittent  strength.  It  was 
aided,  early  in  February,  by  the  announcement  of  the  New 
absort.srtiieentral  Central’s  purchase  of  the  Lake  Shore  and  Michigan 
Lake  Shore.  Southern  Railway,  and  by  a  sharp  upward  manipulation  of 
Metropolitan  shares  a  few  days  later.  Metropolitan,  which 
had  sold  about  par  in  the  previous  November  and  had  since  paid  a  twenty 
per  cent,  scrip  dividend,  ran  from  149  to  169  in  a  week,  and,  on  February 
14th,  tumbled  from  171 %  to  157  in  fifteen  minutes. 

It  was  the  blowing  up  of  the  battleship  Maine  in  Havana  Harbor  on 
the  night  of  February  15,  1898,  and  the  deaths  of  266  of  our  officers  and 
men,  that  really  destroyed  the  possibility  of  continued  peace  with  Spain. 

The  news  reached  the  market  upon  the  following  day  and 
provoked  instant  weakness  in  securities.  It  was  the  inception 
of  a  violent  decline  in  prices,  which  lasted  for  nearly  six  weeks 
and  was  sufficiently  extensive  to  be  denoted  a  panic.  One 
incident  after  another  hurried  the  approach  of  war.  On  behalf 
of  this  country,  a  naval  court  of  inquiry  sailed  for  Havana,  investigated 
the  circumstances  of  the  tragedy,  and  returned  to  report  that  the  Maine 
had  been  destroyed  by  an  external  explosion.  Meanwhile  both  nations 
had  been  busy  in  the  purchase  of  battleships,  and  in  similar  hostile 
preparations,  and  Congress  enthusiastically  appropriated  $50,000,000  for 
American  defense.  Throughout  the  country  business  men,  with  an  excess 
of  precaution,  were  contracting  their  lines.  On  ’Change  crash  after  crash 
showed  how  ill-fitted  were  the  speculators  to  prejudge  the  true  results  of 
the  conflict  that  every  one  knew  to  be  impending. 


Destruction  of 
the  battleship 
Maine  initiates 
a  panic. 


THE  INFLUENCE  OF  A  FOREIGN  WAR 


379 


Alarm  of 
the  bears. 


The  war  panic  reached  its  extreme  on  March  26th,  about  twenty-four 
hours  after  the  country  knew  the  gist  of  the  court  of  inquiry’s  report. 
Prices  began  this  day  to  ascend  from  a  level  to  which  they  never  returned 
and  doubtless  never  will  return  while  America  is  a  growing  nation.  The 
ascending  movement  became  one  of  the  most  remarkable  in  stock  market 
history.  In  the  ten  months  succeeding,  Burlington  ran  from  86  to  141 
and  Metropolitan  scored  a  net  advance  of  85  points. 

The  bears  were  terrified  on  March  28th  by  the  circulation  of  the  rumor 
that  a  peaceful  settlement  of  the  Spanish  trouble  was  at  hand.  Sugar 
rushed  up  from  107%  to  121.  Metropolitan  rose  from  125% 
to  142%,  and  the  general  list  showed  remarkable  strength.  A 
denial  of  the  statement  provoked  reaction,  but  the  market 
held  a  portion  of  its  gain.  The  recent  liquidation  had  been  complete. 

It  required  well  nigh  a  month  for  the  circumstances  which  had  rendered 
peace  impossible  to  bring  about  the  actual  declaration  of  war.  The  Presi¬ 
dent’s  message  early  in  April  went  no  further  than  to  request  authority 
to  use  the  army  and  navy  for  the  purpose  of  ending  the  Cuban  war  and 
left  doubt  in  the  popular  mind  as  to  whether  he  meditated  an  attack  upon 
Spain  or  upon  the  insurgents.  On  the  twentieth,  as  the  result 
of  action  by  Congress,  he  signed  an  ultimatum  to  the  Spanish  ®^inni^g  of 
Government,  limiting  the  time  in  which  satisfaction  could  be  ^th  Spam, 
given  for  the  Maine  outrage,  though  Spain  denied  all  responsi¬ 
bility  in  the  matter.  This  ultimatum  was  refused.  On  the  twenty -second 
Rear  Admiral  Sampson’s  squadron  established  a  blockade  at  Havana,  and 
Spain  declared  war  on  the  following  day. 

It  was  on  Monday,  May  2d,  that  the  stock  market  reaped  the  first 
benefits  from  our  rapid  succession  of  victories  over  Spain.  The  news  of  the 
battle  of  Manila  Bay  on  the  previous  day  was  ringing  in  the  universal  ear. 
With  the  realization  of  the  ease  with  which  Dewey  had  annihilated  the 
Spanish  fleet  came  a  sense  that  the  whole  long  ordeal  of  dread  had  been 
needless  and  foolish.  The  entire  list  opened  up  — Sugar  at 
from  127  to  130  against  a  close  of  123%  on  Saturday;  St. 

Paul  at  92  against  87%;  Metropolitan  at  145  against 
139% — and  this  initial  strength  was  well  maintained  throughout  the  day. 
Coincidentally,  young  Leiter  forced  a  startling  rise  in  wheat,  aided  by  the 
removal  of  the  French  export  duty.  Between  May  2d  and  10th,  the  May 
options  in  Chicago  rose  from  $1.17%  to  $1.85,  the  price  of  flour  advanc¬ 
ing  a  dollar  a  barrel.  On  the  10th  Robert  Lindblom  of  Chicago,  who  had 
been  fighting  Leiter,  became  insolvent.  This  was  the  last  of  the  Leiter 
triumphs,  since  the  price  of  cash  wheat  and  the  figures  for  all  the  options 
began  rapidly  to  decline  from  this  point.  The  stock  traders  ignored  the 
gigantic  struggle  in  the  grain  pit.  The  securities  market  was,  in  fact, 


Rise  in  stocks 
and  wheat. 


380 


THE  NEW  YORK  STOCK  EXCHANGE 


End  of  the 
Leiter  wheat 
corner  causes 
a  decline  in 
securities. 


phlegmatic,  but  with  a  continuous  tendency  to  advance.  When  on 
Monday,  June  13th,  Mr.  Leiter  received  the  fall  for  which  he  had  so 
vigorously  been  riding,1  and  wheat  options  tumbled  in 
Chicago,  Duluth,  Minneapolis  and  New  York,  wiping  out 
many  paper  fortunes,  stocks  declined  two  points  or  more  in 
sympathy.  But  most  of  the  traders  merely  shrugged  their 
shoulders,  remarked  that  cornering  a  staple  was  bad  busi¬ 
ness,  and  forgot  the  incident. 

Throughout  the  Spanish  war  period  speculation  in  stock  was  narrow 
but  preserved  a  firm  tone.  The  capitulation  of  San  Juan  de  Puerto  Rico, 
the  destruction  of  Cervera’s  fleet  outside  the  Harbor  of  Santiago,  the 
dashing  land  campaign  in  Cuba,  in  which  successive  American  victories  led 
to  the  capture  of  Santiago  itself— all  failed  to  bring  an  enthusiasm  into 
the  market,  and  dulness  ruled  the  exchange  through  the  epoch-making 
month  of  July.  Possibly  the  new  taxes2  upon  stock  transfers 
Market  dull  and  bank  checks  —  which  were  among  the  measures  adopted 
durmg  the  war.  ^  Government  to  provide  war  funds — contributed  to 

repress  speculation.  But  the  public  feeling  certainly  was  one  of  renewed 
confidence.  In  June  the  Government  offered  the  people  $200,000,000  in 
three  per  cent,  twenty  year  bonds  at  par,  and  within  a  month  the  issue  was 


six  times  over  subscribed. 

On  July  26th  the  Queen  Regent  of  Spain  formally  sued  for  peace,  and 
stocks  moved  rapidly  upward  under  the  leadership  of  Sugar.  The  Spanish 
Cabinet  yielded  to  our  demands  on  August  7th,  and  on  the  12th — the  same 
day  on  which  the  United  States  flag  was  hoisted  at  Honolulu,  and  Hawaii 
became  ours  by  peaceful  annexation— the  peace  protocol 3  with  Spain  was 


1  The  Leiter  wheat  deal  was  begun  on  April  2, 1897,  with  the  purchase  of  wheat  at  72%c,  and  in  the 
following  June  Leiter  bought  it  as  low  as  64%c.  The  highest  price  which  he  forced  in  Chicago  was  $1  85 
though  the  May  option  went  to  $1.91  on  May  10th,  1898,  in  New  York.  On  the  last  day  of  May  1898' 

May  wheat  opened  in  Chicago  at  $1.40— thirty-five  cents  off— fell  to  $1.25  and  closed  at 
Joseph  Leiter  s  the  latter  figure.  On  the  following  day  its  equivalent— cash  wheat— opened  at  $1 18 
venture  in  wheat,  and  declined  to  $1.08.  Leiter  was  virtually  beaten  at  the  end  of  May,  when  the 
deliveries  proved  heavy  enough  to  swamp  him,  the  foreign  demand  being  inadequate  to 
his  needs.  Throughout  the  early  part  of  June  cash  wheat  fell  steadily.  On  the  13th,  the  day  of  the  Leiter 
failure,  it  sold  at  85c,  and  the  July  option,  which  was  worth  $1.16%  a  fortnight  previous,  fell  from  85c  to 
75c  a  bushel. 

Joseph  Leiter  was  carrying  16,000,000  bushels  of  wheat  when  he  acknowledged  defeat.  His  father 
Levi  Z.  Leiter,  devoted  several  million  dollars  to  paying  the  young  man’s  debts.  The  Illinois  Trust  and 
Savings  Bank,  as  trustee,  took  charge  of  the  wheat  carried  in  the  younger  Leiter’s  account. 

2  These  taxes  became  effective  on  July  1,  1898.  That  upon  stock  transfers  was  two  dollars  for  each 
hundred  shares,  and  that  upon  bank  checks  was  two  cents  for  each  $100  of  face  value. 


3  The  peace  protocol,  which  was  signed  by  Secretary  Day  of  the  Department  of  State,  and  the  French 
Ambassador,  M.  Cambon,  who  represented  Spain,  arranged  a  general  agreement  for  the  cessation  of 
hostilities  and  left  the  details  of  the  settlement  in  the  hands  of  a  peace  commission, 
Terms  of  the  representing  both  countries,  which  met  in  Paris.  By  the  terms  of  the  treaty  which  this 

treaty  with  commission  negotiated,  Spain  sold  us  the  Philippines  (where  Dewey  was  already  in 

Spain.  control)  for  $20,000,000,  certainly  a  generous  price,  and  ceded  to  us  Cuba,  Puerto  Rico 

and  Guam.  Our  flag  was  raised  in  Havana  on  January  1, 1899. 

Trouble  with  the  Philippine  insurgents,  under  Aguinaldo,  was  brewing  in  the  latter  part  of  1898, 
but  it  did  not  begin  until  February,  1899,  after  Agoncillo,  Aguinaldo’s  representative,  had  made  a  trip 
to  America  to  get  some  expression  from  our  President  as  to  our  future  policyin  the  Philippines,  and  Mr. 
McKinley  had  refused  to  see  him. 


THE  INFLUENCE  OF  A  FOREIGN  WAR 


381 


signed.  With  the  beginning  of  August  the  public  came  rushing  into  the 
stock  market.  Peace  and  good  harvests  were  in  sight.  All  through  the 
country  the  commercial  demand  for  staples  showed  quick  response  to  the 
changed  condition  of  affairs.  Stocks  advanced  with  exhila-  „  . 

•  .  _  _  •  _  Spam  sues  lor 

rating  speed.  Brooklyn  Rapid  Transit,  which  had  sold  at  35  peace  and  a  rise 
early  in  the  year,  was  carried  rapidly  above  70  by  Flower  &  in  securities 
Co.,  and  all  the  old  speculative  favorites  showed  kindred  begins' 
vigor.  In  September  the  fever  was  checked  by  tight  money  and  by  conflict 
between  rival  gas,  sugar  and  tobacco  magnates.  Between  September  19th 
and  October  1st,  American  Tobacco  fell  from  153%  to  115%,  netting  a  small 
fortune  for  James  R.  Keene.  A  Supreme  Court  decision  adverse  to  the 
Joint  Traffic  Association,  and  the  disquieting  quarrel  between  England 
and  France  over  the  Fashoda  incident,  caused  some  weakness  in  October, 
but  the  market  recovered,  and  Tobacco,  Sugar,  St.  Paul,  Federal  Steel 
and  Brooklyn  were  soon  leading  another  spectacular  advance.  Early 
in  November  the  Republican  party  swept  the  country,  and  Theodore 
Roosevelt  was  elected  Governor  of  the  Empire  State.  Our  final  settlement 
with  Spain,  on  November  28th,  ended  some  unpleasant  gossip  anent  a 
hitch  in  the  peace  negotiations.  The  advance  proceeded  without  much 
interruption  throughout  the  remainder  of  the  year,  and  on  December  27th 
the  sales  of  stock  exceeded  925,000  shares.  The  organization  of  the 
Continental  Tobacco  Co. — a  rival  to  the  American — and  the  forming  of  tin 
plate,  furniture,  pottery  and  flour  combinations  marked  the  return  in  full 
vigor  of  the  time  of  trusts  and  commercial  activity. 


RICES  of  securities  were  carried  to  unprecedented  heights  in  January, 
1899, 1  by  the  usual  reinvestment  demand  and  a  speculative 
movement  which  seemed  to  increase  in  power  daily.  Brooklyn 
Rapid  Transit  stock  was  the  chief  public  fancy  and  ran  easily  up  to  96% ; 
a  single  week  witnessed  the  sales  of  twice  as  many  shares  of 
Brooklyn  as  were  outstanding.  On  Monday,  January  23d,  ^^fation  ,n 
the  record  for  activity  in  the  general  list  was  broken,  with  January,  18*99. 
sales  of  1,575,000  shares.  “Pan  Handle”  common  stock, 
which  had  closed  on  Saturday  at  68%,  opened  at  75,  ran  up  to  88  and 


1  The  following  table  will  indicate  the  decline  in  stocks  during  the  war  panic  of  1898  and  their 
advance  from  the  prices  then  established  to  the  high  level  of  January,  1899 : 

„  Feb.  15, 1898.  Mar.  26, 1898.  January,  1899. 

Stock-  High.  Low.  High. 

Metropolitan, .  164%  125%  220% 


Sugar, 
Manhattan, 
St.  Paul, 
Cons.  Gas,  . 
Penn.  R.R., . 
C.,  B.  &  Q.,  . 


139% 

117% 

95% 

194 

119% 

102% 


107% 

91 

85% 

167 

111% 

85% 


135% 

118% 

130% 

196% 

142 

141% 


382 


THE  NEW  YORK  STOCK  EXCHANGE 


closed  at  74,  and  Canada  Southern  ran  from  60  to  70  and  back  to  63. 
Brokers  found  it  impossible  to  execute  the  bulk  of  their  orders.  In  the 
next  three  days  Metropolitan  rose  from  196  to  220%.  The  public  indul¬ 
gence  in  stock  speculation  was  coincident  with  a  craze  for  trust  formation. 
The  American  Steel  and  Wire  Company,  in  which  John  W.  Gates,  John  A. 
Drake,  Isaac  L.  Elwood  and  a  number  of  other  rich  Westerners  were 
dominant,  increased  its  capital  stock  from  $24,000,000  to  $90,000,000, 
and  absorbed  a  number  of  its  competitors.  Gas  and  electric  light  com¬ 
panies  in  Ohio  and  Indiana  were  combined,  and  borax,  thread,  paper,  cast 
iron  and  oatmeal  trusts,  among  others,  were  added  to  the  list  of  large 
corporations.1 

Early  in  February  the  smouldering  trouble  between  our  troops  in  the 
Philippines  and  Aguinaldo’s  insurgents  burst  into  flame.  The  Filipino 
attack  was  so  promptly  repulsed  that  the  effect  of  these  new  hostilities 
upon  stock  prices  was  merely  temporary.  However,  the  natural  tendency 
of  the  market  was  reactionary.  Metropolitan  (which  sold  close  to  250  at 
this  time)  and  Consolidated  Gas  were  exceptions. 

Between  the  17th  and  23d  American  Tobacco  ran  up  from  134  to  189, 
and  a  few  days  later  sold  at  198%,  under  the  influence  of  reports  of  a  trade 
combination.  Third  Avenue  advanced  from  191  to  238  in  a  single  week, 
went  to  242  a  day  or  two  later  and  dropped  to  212%  in  another  week. 
Sugar  went  through  a  somewhat  similar  performance  in  the  following 
month,2  but  the  speculation  in  Brooklyn  Rapid  Transit — which  ran  up  to 
136% — was  the  most  notable  feature  of  the  March  market. 
Rapid  Transit  Governor  Flower’ s  firm  was  leading  the  bull  movement  in 

speculation.  Brooklyn,  People’s  Gas  and  Federal  Steel,  and  his  following 

was  large.  A  waiter  who  had  started  a  Brooklyn  Transit  deal 
in  the  previous  April  closed  out  his  account  with  a  profit  of  $100,000, 
which  Wall  Street  took  back  at  a  later  date.  Brooklyn,  throughout  the 
wild  speculation  of  the  period,  was  the  public  favorite.  Words  failed  the 
satellites  of  the  ticker  to  describe  the  glowing  future  of  this  trolley  road, 

1  In  the  following  months  the  National  Tube  Company  (organized  under  the  auspices  of  J.  P.  Morgan 
&  Co.  with  a  capital  of  $60,000,000),  the  American  Car  &  Foundry,  Union  Bag  &  Paper,  Electric  Boat, 
New  York  Electric  Vehicle,  United  Shoe  Machinery,  American  Woolen,  and  United  Zinc  &  Lead  companies 
were  among  the  corporations  formed.  A  bicycle  trust  and  a  new  whiskey  trust  came  into  being.  The 
Brooklyn  Rapid  Transit  Company  increased  its  capital  stock  from  $20,000,000  to,  $45,000,000,  and 
absorbed  the  Nassau  Electric  Railroad  Company. 

2  On  March  16th  Sugar  ran  from  141  to  170— almost  ten  points  above  its  previous  high  record- 
broke  to  151,  rallied  to  162%  and  closed  at  159%,  the  sales  aggregating  265,000  shares.  This  movement 
was  merely  a  squeeze  of  the  shorts,  which  rumor  credited  to  Thomas  W.  Lawson.  The  Sugar  Trust  had 
enlarged  its  capital  in  1893  and  absorbed  plants  which  gave  it  control  of  ninety  per  cent,  of  the  country’s 
sugar  production.  New  competition  by  the  Doschers  and  the  Arbuckles  injured  the  Trust’s  business,  and 
Mr.  Havemeyer,  a  few  months  before  the  squeeze  of  March,  1899,  had  opened  fire  on  his  foes  by  reducing 
the  price  of  refined  sugar  to  an  unprofitable  level.  This  started  the  bear  attack. 

The  movement  on  March  16th  was  extremely  rapid.  One  man,  who  was  short  of  1,500  shares, 
started  to  make  out  a  check  for  $45,000  when  the  price  was  170,  to  protect  his  account.  As  he  was 
writing  the  stock  fell  back  to  155,  and  he  drew  the  check  for  $22,500  instead.  Sugar  sold  at  182  on 
March  20th,  and  fell  to  159  the  next  day. 


THE  INFLUENCE  OF  A  FOREIGN  WAR 


383 


which  was  no  more  in  sight  of  dividends  now  than  when  it  sold  at  35  in  the 
previous  year.  The.  market  reacted  early  in  April  and  a  sharp  break  came 
on  the  6th,  carrying  Brooklyn  below  107,  but  nine  days  later  the  public 
buying  had  raised  its  price  to  137,  and,  after  a  fresh  decline,  it  rallied  to 
within  a  fraction  of  that  price  later  in  the  month.  Then  it  began  the 
inevitable  descent  toward  the  level  of  intrinsic  worth,  ruining  many  of  its 
too  zealous  friends  as  it  fell. 

It  was  at  this  time  that  the  news  of  an  electric  combination  by  the 
Whitney -Widener- Elkins  syndicate,  and  of  the  flotation  of  the  Amalga¬ 
mated  Copper  Company,  with  its  capital  of  $75,000,000/  tended  to  excite 
the  public  mind. 

The  immense  growth  and  huge  profits  of  the  Standard  Oil  Company 
had  stimulated  general  cupidity.  Small  investors  who  were  not  engaged  in 
attempting  to  make  fortunes  by  betting  on  the  ticker  were 
eagerly  awaiting  opportunity  to  put  a  dollar  into  some  new  Amalgamated 
enterprise  and  draw  out  a  hundred  dollars  a  year  or  two  Copper, 
later.  The  Amalgamated  Copper  shares  were  many  times 
over-subscribed,  and,  after  having  been  listed,  began  to  advance  rapidly  in 
price.  But  the  general  list  now  showed  the  effect  of  a  too  sudden  rise. 
Weakness  in  April  was  largely  centred  in  the  Gas  stocks,  due  to  a  rate  war 
between  the  Consolidated,  Standard  and  New  Amsterdam  Gas  companies, 
which  continued  for  months  afterward.  The  first  week  in  May  witnessed 
a  smart  reaction,  and  on  May  9th  prices  fell  violently.  Metropolitan 
tumbled  from  231  to  216,  Third  Avenue  from  211  to  200,  and  Brooklyn 
from  123%  to  114%.  The  instability  of  the  tractions  was  credited  to  the 
agitation  over  the  Ford  bill  to  tax  franchises  introduced  in  the  Legislature. 
Still,  the  market  merely  wanted  an  excuse  for  recession.  It  was,  in  fact, 
the  vulnerable  character  of  the  market  that  made  possible  the  break  which 
followed  upon  Governor  Flower’s  death.  Roswell  Pettibone  Flower  was 
regarded  at  the  time  as  the  chief  leader  in  bull  manipulation.  Once  a 
farm  boy  and  later  a  brickyard  laborer,  he  had  advanced  himself  through 


1  Marcus  Daly,  who  was  as  well  known  a  copper  mine  owner  as  any  one  in  America,  was  the  first 
president  of  the  Amalgamated  Copper  Company,  and  Henry  H.  Rogers  of  the  Standard  Oil  Company  was 
its  vice-president.  The  directorate  likewise  included  William  Rockefeller,  F.  P.  Olcott,  Roswell  P.  Flower, 
Robert  Bacon  and  Albert  C.  Burrage.  The  public  fancy  was  captured  by  the  prominence  of  the  men  behind 
the  enterprise,  and  subscriptions  were  made  for  more  than  $400,000,000  of  the  stock.  Thomas  W.  Lawson 
publicly  advised  its  purchase  for  200.  In  recently  published  articles  he  has  explained  at  length  that  Mr. 
Rogers  and  a  few  associates  bought  the  mines  which  were  comprised  in  the  company  for  $39,000,000 
and  floated  them  at  $75,000,000.  Long  before  the  appearance  of  these  articles  Wall  Street  at  least  was 
familiar  with  the  nature  of  the  deal  which  the  Amalgamated  Copper  Company  represented,  and  a  remark¬ 
able  decline  in  the  stock  gave  evidence  of  the  artificiality  of  its  rise. 

It  was  rather  a  coincidence  that,  about  the  time  of  the  Amalgamated  Company  flotation,  the 
Standard  Oil  Company,  which  was  believed  to  be  behind  the  Copper  combination,  increased  its  capital 
stock  from  $10,000,000  to  $110,000,000.  The  Standard  Oil  Company  of  Ohio  had  been  ordered,  in  1892, 
to  dissolve,  as  the  result  of  an  action  by  that  State,  and  had  consumed  some  seven  years  in  getting  ready 
to  do  so,  paying  130  per  cent,  in  dividends  meanwhile.  Its  stock  had  risen  from  166  to  490  in  the  interim. 
In  1899  the  liquidating  certificates  were  exchanged  for  shares  of  the  Standard  Oil  Company  of  New  Jersey. 
The  devil  had  been  beaten  around  the  stump. 


384 


THE  NEW  YORK  STOCK  EXCHANGE 


enterprise  and  sagacity  to  a  position  of  marked  financial  power.  Certain 
securities— such  as  Brooklyn,  Air  Brake,  Federal  Steel,  and  People’s  Gas— 
known  as  “Flower  stocks”  were  favorites  with  the  speculative  public,  and 
Mr.  Flower  was  looked  to  as  the  natural  source  of  their  support.  His 
death,  from  heart  disease,  occurred  at  the  Country  Club  at  Eastport,  L.  I., 
on  the  evening  of  Friday,  May  12th.  When  the  market  opened 
The  Flower  upon  the  following  day,  with  initial  breaks  of  from  one  to 
May  13, 1899.  thirty  points  in  the  “Flower  stocks,”  the  paper  fortunes  of 
many  of  the  late  Governor’s  followers  were  annihilated  in 
a  moment.  The  low  prices  of  the  day  came  in  the  first  few  minutes  of 
trading,  and  then  the  market  rallied.  But  the  great  bull  movement  of 
1899  was  at  an  end.1 

Stocks  advanced  somewhat  in  June,  despite  exports  of  gold,  but  once 
more  fell  away  upon  the  initiation  of  a  futile  Congressional  investigation 
of  trusts.  Easy  money  and  increases  in  pig  iron  production  and  in  steel 
imports  helped  the  market  in  the  summer,  but  dulness  for  the  most  part 
was  noticeable.  The  stock  of  the  American  Tobacco  Company,  however, 
was  doubled  and  the  watered  issue  ran  up  to  131%.  In  September  the 
bears  had  the  market.  Cornelius  Vanderbilt’s  death  on  the  12th,  a  period 
of  tight  money,  and  the  threatening  attitude  of  the  Transvaal  war  cloud 
depressed  stock  prices.  Mr.  Keene  indulged  in  an  effective  attack  on  the 
“Flower  stocks,”  and  the  once  glorious  Brooklyn  tumbled  below  87. 


outbreak  of  hostilities  between  Great  Britain  and  the  Transvaal 
d  a  depressive  influence  upon  Wall  Street  during  the  latter  part 
1899.  True,  values  improved  immediately  after  the  declaration 
of  war.  There  were  favorable  signs  in  the  financial  sky.  The  Steel  Rail 
pool  was  getting  enormous  orders  from  the  railroads.  Pig  iron  was  selling 

1  New  York  Air  Brake  led  the  decline  of  May  13th,  falling  5  to  10  points  between  sales.  The 
following  table  indicates  the  movement  of  “  Flower  stocks”  on  this  day  : 


Stock. 

Close. 

Opening. 

Low. 

Close. 

May  12. 

May  13. 

May  13. 

May  13. 

Brooklyn  R.  T.,  . 

.  118% 

110  to  100 

100 

106% 

People’s  Gas, 

.  119 

112  “  104 

101 

112% 

Rock  Island, 

.  112% 

109  “  108 

107% 

109% 

Fed.  Steel,  com., . 

61% 

58  “  50 

50 

55% 

Fed.  Steel,  pfd.,  . 

81% 

78% 

72% 

77% 

N.  Y.  Air  Brake,  . 

185 

155 

125 

164 

Atchison,  pfd.,  . 

55% 

54% 

51 

52% 

Inter.  Paper,  com.,  . 

49% 

44  “  39 

35 

46 

Int.  Paper,  pfd.,  . 

81% 

78 

81 

Governor  Flower’s  power  as  a  manipulator  is  instanced  by  his  lifting  of  Air  Brake  from  14,  in  1898, 
to  above  200  early  in  1899.  He  was  the  promotor  of  the  Brooklyn  Rapid  Transit  Company  and  also 
reorganized  the  Chicago  Gas  Company  into  the  People’s  Gas,  Light  &  Coke  Company  of  Chicago.  He  was 
also  interested  in  the  formation  of  the  Illinois  Steel  and  Minnesota  Iron  &  Steel  companies  into  the  Federal 
Steel  Company.  John  W.  Gates  sold  his  interest  in  the  Illinois  Steel  Company  at  the  time  and  organized 
the  American  Steel  &  Wire  Company. 

Governor  Flower’s  estate  was  estimated  at  $3,781,969.  It  contained  only  2,815  shares  of  Brooklyn 
Rapid  Transit  stock. 


THE  INFLUENCE  OF  A  FOREIGN  WAR 


385 


for  twice  what  it  had  brought  a  year  before.  But  as  the  news  of  one 
British  reverse  after  another  forced  liquidation  in  the  London  market,  our 
own  vulnerability  grew  evident.  The  fall  business  on  ’Change 
was  uneventful,  save  for  a  pretty  speculation  in  “little  ^wafwith1 
Leather,”  an  upward  spurt  when  the  Government  promised  to  the  Boers, 
relieve  the  money  market  by  purchasing  bonds,  and  a  break 
early  in  December  upon  the  Supreme  Court’s  decision  adverse  to  the 
Addyston  Pipe  Trust.  Then  came  a  pressure  of  tight  money,  causing 
heavy  liquidation  on  December  8th  and  9th,  and  directly  afterward  the 
news  of  British  misfortune  poured  into  London  and  New  York.  Gatacre 
was  beaten  at  Stromberg,  and  Lord  Methuen  had  been  repulsed  with  heavy 
loss  at  Magersfontein.  Sterling  exchange  rose  promptly  and  crash  followed 
crash  within  financial  walls. 

On  December  16th  the  world  knew  of  Buller’s  repulses  at  Colenso. 
Heavy  liquidation  in  London  caused  depression  here,  Third  Avenue  selling 
at  126  and  Metropolitan  at  166%.  The  downward  tendency  of  prices  was 
hastened  by  financial  trouble  in  Boston,  where  Copper  share 
owners  were  paying  sorely  for  their  recent  over  speculation,  do^ldverseiy. 
The  Produce  Exchange  Trust  Company  of  this  city,  which  was 
heavily  committed  in  United  States  Flour  Milling  and  Seaboard  Air  Line 
shares,  closed  its  doors  on  the  18th,  and  Henry  Allen  &  Company  sus¬ 
pended  on  the  same  day.  Call  money  ran  to  186  per  cent.,  and  the 
market  wore  an  ominous  aspect.1  At  this  juncture  The  Clearing  House 
banks  rapidly  formed  a  money  pool  of  $10,000,000  and  broke  the  call  rate 
to  six  per  cent.  Stock  prices  then  rallied  sharply.  But  many  of  them  went 
still  lower  four  days  afterward.  The  year,  despite  its  early  buoyancy,  and 
its  flotation  of  new  trusts  with  capital  of  two  billions,  ended  in  bitterness 
and  gloom. 

Although  Lord  Roberts  had  taken  command  of  the  British  forces  in 
South  Africa,  there  was  much  uncertainty  over  the  war  situation,  and  the 
market  declined  early  in  January,  1900,  upon  news  of  Boer  activities  about 
Ladysmith.  The  evidence  of  American  prosperity  and  financial  power  con¬ 
tinued  strong.  The  price  of  pig  iron  had  doubled  in  the  last  year,  the 
volume  of  clearing  house  exchanges  was  more  than  twice  that  of  1896,  the 
gold  production  of  the  new  world  was  still  heavy.  But  the  conflicts  of 
rival  capitalists  affected  prices  adversely.  The  Standard  Oil  interests  had 

1  The  following  table  indicates  some  of  the  striking  price  changes  of  December  18, 1899  : 


Stock. 

High. 

Low. 

Close. 

Loss. 

Sugar, 

.  .  .  131% 

120 

125 

5 

Amer.  Tobac., 

99 

78% 

83 

16 

B.  R.  T.,  . 

Cont.  Tobacco, 

.  .  .  78 

65% 

73% 

5% 

.  .  .  31% 

20 

22% 

9 

Fed.  Steel. 

52 

39% 

45 

6% 

People’s  Gas,  . 

.  .  .  103% 

90% 

94 

9 

386 


THE  NEW  YORK  STOCK  EXCHANGE 


succeeded  in  capturing  the  control  of  a  new  lighting  trust  from  the  Whitney 
party,1  and  the  news  of  this  coup  was  followed  by  trade  war  developments 
which  sent  Sugar  stock  tumbling  20  odd  points.  Toward  the 
Causes  of  end  0f  m0nth  the  positive  news  of  a  severe  repulse  of 
January.  Buller’s  army  at  the  Tugela  River  found  the  market  in  an 

over -sold  condition  and  stocks  rallied.  Even  the  collapse 
of  two  of  the  recent  trusts — the  United  States  Flour  Milling  and  Brooklyn 
Wharf  &  Warehouse  Companies,  both  promoted  by  Thomas  A.  McIntyre — 
proved  of  little  assistance  to  the  bears. 

A  battle  between  steel  kings  —  Henry  C.  Frick’s  suit  against  Andrew 
Carnegie,  whom  the  plaintiff  accused  of  having  withheld  him  from  his 
rights2  —  aroused  public  interest  in  February.  But  the  really  absorbing 
feature  of  the  market  was  a  bear  campaign  against  Third  Avenue  stock, 
which  was  now  in  full  swing.  The  Whitney  party  had  been 
The  campaign  worsted  by  the  Standard  Oil  cohorts  in  the  gas  and  electric 

Third  Avenue.  fight.  They  were  now  deriving  satisfaction  from  an  attack 

of  their  own  upon  a  weaker  foe.  They  had  resolved  to 
capture  the  Third  Avenue  Railroad  and  make  it  an  appendage  to  their 
Metropolitan  system.  To  accomplish  their  desire  they  must  beat  down 
the  price  of  the  coveted  shares. 

Fortunately  for  Mr.  Whitney’s  plans  the  Third  Avenue  Railroad  was 
staggering  beneath  an  unwieldy  floating  debt,  which  had  been  acquired 
in  the  course  of  buying  subsidiary  properties  and  completing  the  road’s 
equipment  by  the  employment  of  a  Tammany  contractor.  The  contract 
work  was  understood  to  have  enriched  a  little  clique  in  the  Third  Avenue 
directorate.  Reports  that  the  property  had  been  plundered  and  ruined 


1  The  New  York  Gas  and  Electric  Light,  Heat  &  Power  Company  was  organized  by  William 
C.  Whitney  and  Thomas  F.  Ryan  in  November,  1898,  with  a  capital  of  $25,000,000,  and  absorbed 
a  number  of  electric  companies.  Parties  in  this  corporation  were  also  identified  with  the  New  Amsterdam 
Gas  Company.  The  Consolidated  Gas  Company  was  controlled  by  the  Standard  Oil 
Standard  Oil  people,  who  determined  upon  taking  the  Whitney  lighting  trust  into  camp,  and  putting 

financiering.  down  the  price  of  Metropolitan  stock — of  which  the  Whitney  contingent  were  heavy 

owners  — as  a  means  of  accomplishing  their  end.  When  the  deal  for  a  merger  of  the 
new  corporations  was  effected,  it  was  decided  to  end  the  gas  war,  and,  with  this  object  in  view,  Mr. 
Whitney  bought  Russell  Sage’s  and  the  Andrews  estate’s  holdings  of  Standard  Gas  Company  stock. 
This  led  to  a  complete  gas  and  electric  merger,  with  the  lighting  industry  in  this  city  dominated  by  the 
Standard  Oil  party.  A  slight  indication  of  the  monstrous  strength  of  this  party  was  furnished  by  the 
increase  of  the  capital  stock  of  the  National  City  Bank  from  $1,000,000  to  $10,000,000  in  January, 
1900.  The  Standard  Oil  Company  declared  a  dividend  of  20  per  cent,  upon  its  new  capital  of  $100,- 
000,000  on  February  6, 1900,  and  the  stock  advanced  33  points  to  545,  on  sales  of  400  shares. 

2In  1892  Carnegie  Bros.  &  Co.  (having  a  capital  of  $5,000,000)  were  re-organized  into  the  Carnegie 
Steel  Company,  capitalized  at  $25,000,000.  Henry  C.  Frick  owned  about  six  per  cent,  of  the  stock  of  the 
latter  concern.  Its  shareholders  were  supposed  to  be  bound  by  the  so-called  “ironclad  agreement,”  which 
compelled  any  of  the  signatories  who  desired  to  withdraw  from  the  company  to  sell  his  stock  at  a  price 
decided  on  by  Andrew  Carnegie.  Mr.  Frick’s  resignation  from  the  directorate  was  forced  by  Carnegie  in 
December,  1899. 

Mr.  Carnegie  held  58%  per  cent,  of  the  stock  of  the  Carnegie  Steel  Company.  In  May,  1899,  he 
received  from  Judge  W.  H.  Moore  (who  then  had  a  large  steel  trust  in  mind)  a  bonus  of  $1,170,000  for 
a  ninety  days’  option  to  purchase  this  property  at  $157,950,000.  Mr.  Frick  calculated  on  this  basis  that 
he  was  entitled  to  $16,238,000  for  his  stock  and  sued  for  that  amount.  Mr.  Carnegie  maintained  that 
the  proper  price  was  $6,000,000.  The  suit  was  eventually  settled  out  of  court. 


THE  INFLUENCE  OF  A  FOREIGN  WAR 


387 


were  carefully  circulated  throughout  the  bear  campaign  on  the  stock. 
Much  exaggeration  crept  into  these  stories,  but  the  evident  difficulty  of 
financing  the  road’s  indebtedness  lent  color  to  them.  The 
public  became  speedily  imbued  with  the  idea  that  this  once  Slanderiag  a 
prosperous  corporation,  the  shares  of  which  had  sold  at 
nearly  250  in  the  previous  year  and  were  the  investments  of  the  little 
means  of  widows  and  orphans,  had  fallen  into  bankruptcy  through  the 
malfeasance  of  its  directors.1 

Third  Avenue  stock  fell  from  126  to  119%  on  January  10,  1900,  and 
worked  rapidly  downward  from  this  date.  It  had  fallen  to  107  on  the 
25th,  and  then  rallied  eleven  points,  but  the  ground  gained  was  lost  in 
another  twenty-four  hours.  The  stock  broke  to  96  early  in  February, 
rallied  twelve  points  on  a  fresh  scramble  of  shorts  to  cover,  and  again  de¬ 
clined  with  rapidity.  The  banking  house  of  Kuhn,  Loeb  &  Co.  had  under¬ 
taken  to  finance  the  road’s  floating  debt.  It  dropped  the  negotiations  in 
mid-February  and  the  market  value  of  the  stock  decreased  again.  On  the 
19th  H.  H.  Vreeland,  president  of  the  Metropolitan  Street 
Railway  Company,  facilitated  the  work  of  the  bears  by  a  ^^frumor 
public  announcement  that  his  company  had  no  intention  of 
buying  the  unfortunate  Third  Avenue  property.  Yermilye  &  Co.,  now  took 
up  an  investigation  of  the  Third  Avenue  floating  debt  with  a  view  to  finan¬ 
cing  it,  but  decided  not  to  attempt  the  task.  Meanwhile  the  stock  kept 
sinking,  sinking.  It  fell  from  90  to  a  point  below  84  on  the  23d,  reached 
74%  on  the  next  day,  sold  at  68  two  days  later,  and  on  the  27th  declined 
from  68  to  51  amid  sales  of  72,000  shares.  The  creditors  of  the  property 
were  encumbering  it  with  mechanics’  liens  and  the  Street  awaited  news  of 
a  receivership  for  the  derelict. 

On  March  1st,  Hugh  J.  Grant  took  charge  of  the  Third  Avenue  Rail¬ 
road  Company’s  offices,  having  been  appointed  receiver  upon  the  applica¬ 
tion  of  creditors.  This  day  although  the  general  list  was  stimulated 
by  the  news  from  South  Africa  that  Ladysmith  had  been  relieved,  Third 
Avenue  stock  fell  to  49%  and  closed  at  50,  a  net  loss  of  8%  points.  On  the 
second  it  sold  at  45%,  while  the  Street  freely  admitted  the  utter  ruin  of  the 
property.  On  the  very  next  day  the  stock,  heavily  bought  by  strong 
commission  houses,  ran  up  to  56.  A  page  had  been  turned  in  the  chapter 
of  manipulation. 

The  Metropolitan  Street  Railway  interests  were  in  fact  engaged  in  buy¬ 
ing  control  of  the  wronged  and  maligned  Third  Avenue  road.  A  fortnight 


1  The  Third  Avenue  road  was  originally  held  in  a  private  copartnership.  In  1858  the  property  was 
sold  to  the  Third  Avenue  Railroad  Company.  In  1891  the  capital  of  the  company  was  increased  from 
$2,000,000  to  $16,000,000.  Early  in  1900  the  floating  debt  of  the  property  was  between  $16,000,000 
and  $17,000,000.  Albert  J.  Elias,  the  president,  was  the  son-in-law  of  Henry  Hart,  who  was  the  principal 
holder  of  Third  Avenue  stock.  Mr.  Hart  was  an  aged  man  and  his  mind  was  failing.  He  was  quite 
unable  to  extricate  his  company  from  its  embarrassments. 


388 


THE  NEW  YORK  STOCK  EXCHANGE 


before,  for  reasons  unprofitable  to  seek,  their  mouthpiece  had  been  induced 
to  explain  publicly  that  the  Metropolitan  had  positively  no  intention  of 
buying  the  Third  Avenue,  and  it  may  be  imagined  that  this 

plan ^of  campaign  Prommciamen^0  had  quickened  the  tendency  of  the  price  to 
decline.  Moreover,  for  a  considerable  time  before  the  stock 
turned  upward,  certain  of  the  directors  of  the  Third  Avenue  property  had 
shown  themselves  rather  lukewarm,  at  least,  in  the  effort  to  protect  its 
good  name.1  It  is  difficult  to  resist  the  conviction  that  the  entire  move¬ 
ment  of  the  stock  was  the  product  of  superior  design. 

The  upward  tendency  of  the  stock,  when  once  defined,  was  as  irresist¬ 
ible  as  its  downward  impetus  had  been.  On  the  14th,  for  example,  the  day 
on  which  the  receiver’s  report,  indicating  the  hopeless  condition  of  the 
property,  was  made  public,  Third  Avenue  ran  from  56  to  above  66.  The 
next  day  it  sold  above  7014,  with  violent  fluctuations.  The  Metropolitan 
purchases  were  concluded  on  the  19th,  when  the  stock  leaped  to  8514  and 
closed  at  85,  the  bulk  of  the  movement  taking  place  in  the  last  fifteen 
minutes.  At  the  end  of  the  day’s  business,  Mr.  H.  H.  Yree- 
rhird  Avenue  m  ian(j  formally  announced  the  purchase  of  Third  Avenue  con- 
trol  by  Metropolitan  interests,  and  made  public  a  letter  of 
congratulations  from  the  venerable  Henry  Hart.  No  one  who  knew  Mr. 
Hart  would  have  credited  him  with  the  literary  composition  of  the  docu¬ 
ment.  But  it  made  good  reading. 

Third  Avenue  opened  five  points  up  on  the  20th,  and  the  frightened 
shorts  rapidly  forced  the  price  to  par.  The  public  was  permitted  to  see 
that  the  plundered  property  when  controlled  by  the  right  hands  was  no 
longer  worthless.  Within  a  brief  time  the  road  was  leased  to  the  Metro¬ 
politan,  the  rental  being  seven  per  cent,  on  the  par  value  of  the  capital 
stock.2  Students  of  affairs  recognized  a  striking  illustration  of  the 
methods  of  high  finance. 

1  Henry  Hart’ s  private  affairs  were  badly  muddled  and  he  was  unable  to  carry  the  huge  amount  of 
stock  which  he  held  in  the  face  of  the  decline.  James  R.  Keene  came  to  his  aid,  taking  over  his  entire 
holdings  of  Third  Avenue.  According  to  report,  these  amounted  to  53,000  shares  of  which  Mr.  Keene 
bought  20,000  shares  outright,  giving  Mr.  Hart  a  call  on  the  other  33,000  shares  at  par.  This  call  was 
exercised  later  (when  the  course  of  events  had  brought  up  the  price  of  the  stock)  by  means  of  a  fresh  loan 
which  Mr.  Hart  was  able  to  negotiate. 

Mr.  Keene  was  regarded,  by  reason  of  this  transaction  as  a  bull  on  Third  Avenue.  The  stock  declined 
heavily  afterward,  but  it  may  be  doubted  that  the  decline  caused  him  any  loss.  He  is  understood  to  have 
briskly  and  deftly  reversed  his  position,  selling  out  the  stock  which  he  had  bought  outright,  and  going 
short  of  a  considerable  quantity  in  time  to  safeguard  his  position. 

2  The  debts  of  the  Third  Avenue  railroad  were  provided  for  by  the  flotation  of  a  $50,000,000  bond 
issue  (guaranteed  by  the  Metropolitan  Street  Railway  Company),  of  which  $35,000,000  was  taken  by 
Messrs.  Kuhn,  Loeb  &  Co. 


XXVII 

CULMINATION  OF  AN  ERA 

EYOND  question  the  greatest  of  those  industrial  combinations 
which  have  formed  so  striking  a  feature  of  trade  activity 
since  the  first  election  of  McKinley  was  the  so-called  Steel 
Trust.  It  was  remarkable  quite  as  much  for  the  interest  it 
elicited  from  the  public  as  for  its  huge  capitalization,  and 
ever  since  its  formation  its  shares  have  been  speculative 
favorites.  Indeed,  the  shares  of  the  smaller  companies  that  went  to  make 
it  up  were  equally  popular  in  their  day.  The  peculiar  nature  of  the  steel 
industry  made  possible  times  of  excessive  profit,  as  well  as  times  of  great 
depression.  The  former  have  predominated  in  recent  years.  Just  prior  to 
the  birth  of  the  Steel  Trust,  the  principal  steel  properties,  the  shares  of 
which  were  listed  on  ’Change,  were  showing  dazzling  earnings  on  their 
grossly  inflated  capitalizations. 

The  leading  iron  and  steel  property — the  Carnegie  Company 1 — was  not 
among  the  footballs  of  Wall  Street.  It  was  a  formidable  rival  of  the  steel 
concerns  dominated  by  the  Morgan,  Flower,  Gates  and  Moore  parties.  It 
was  not,  in  fact,  until  this  Carnegie  competition  threatened  to  become  still 
more  dangerous  that  these  financiers  found  it  necessary  to  organize  the 
United  States  Steel  Corporation.  The  Steel  Trust  was  an  outcome  of  the 
logic  of  events. 

Early  in  April,  1900,  the  stock  market  gave  evidence  of  liquidation, 
and,  toward  the  middle  of  that  month,  an  incident  occurred  which  might 
well  have  tended  to  shake  the  nerves  of  “  Steel  ”  investors.  J ohn  W.  Gates, 
who  had  returned  to  this  city  after  a  western  trip,  suddenly  announced  that 
the  steel  trade  was  in  bad  condition  and  that  he  had  closed  down  twelve 
mills  of  the  American  Steel  and  Wire  Company,  because  of  poor  business. 
Steel  &  Wire  common  dropped  from  51  to  42%,  and  the  preferred  fell  from 

1  In  March,  1900,  the  public  learned  that  Andrew  Carnegie  and  Henry  C.  Frick  had  agreed  to  settle 
their  differences  in  the  formation  of  the  new  Carnegie  Company.  This  corporation  was  capitalized  at 
$200,000,000  of  stock,  of  which  $160,000,000  was  paid  in,  and  $100,000,000  of  bonds. 


390 


THE  NEW  YORK  STOCK  EXCHANGE 


85  to  80 %  on  the  16th,  the  day  the  mills  shut  down,  and  on  the  17th  a 
sharp  break  in  all  the  steel  stocks  ensued.  The  views  of  Mr.  Gates  as 
to  the  trade  met  little  sympathy  outside  of  his  own  company, 
John  w.  Gates  and  certain  of  his  fellow  directors,  who  represented  the 
pest  UP  a  tem  banking  house  of  J.  &  W.  Seligman,  showed  much  displeasure, 
which  ripened  into  hostility.  But  on  April  20th  the  Ameri¬ 
can  Steel  &  Wire  directorate  indorsed  Mr.  Gates  by  cutting  the  prices  of  all 
products  from  thirty  to  thirty-three  and  a  third  per  cent.  The  Steel  stocks 
opened  off  sharply  on  the  following  day  and  indulged  in  semi-panic,  Steel 
&  Wire  common  falling  to  37%,  while  the  public  execrated  Mr.  Gates  for  not 
having  taken  it  into  his  confidence.  His  opponents  in  the  directorate  held 
that  he  had  misled  them  as  to  trade  conditions,  while  he  and  his  intimates 
had  been  quietly  selling  stock.  Washington  Seligman,  a  relative  of  the 
bankers,  even  instituted  legal  proceedings  against  Mr.  Gates;  but  they 
came  to  nothing.  The  American  Steel  &  Wire  directors  met  again  on 
May  7th,  and  Henry  Seligman  and  Frederick  Strauss  resigned  from  the 
board  because  Mr.  Gates  refused  to  do  so.  A  few  days  later  he  voluntarily 
gave  up  the  post  of  chairman  of  the  directorate,  reorganized  the  board  on 
his  own  lines,  and  sailed  away  to  Europe  in  triumph.  The  Gates  person¬ 
ality,  the  Gates  lucky  star,  the  Gates  magnetism  and  daring,  were  familiar 
topics  of  Wall  Street  gossip  from  that  hour. 

Rumors  of  a  steel  combination  were  not  lacking  at  this  time,  but  no 
tangible  steps  to  effect  it  were  taken  until  the  following  year.  Nor  was 
speculation  of  an  epic  character  during  the  remainder  of  1900.  It  was  a 
year  of  progress  and  health,  one  in  which  our  exports  at  last  overtopped 
our  imports,  but  it  was  somewhat  reactionary  from  the  business  excesses 
of  1899,  and  was  marked  by  a  falling  off  in  Clearing  House  activity  and 
Stock  Exchange  dealing. 

The  Transvaal  War  scare  reached  an  end  in  May  with  the  British 
occupancy  of  Pretoria,  and  the  market  showed  signs  of  relief.  The  failure 
on  May  24th  of  Price,  McCormick  &  Co.,1  with  liabilities  of 
faUure7 C°tt0n  $13,000,000,  after  an  extensive  bull  campaign  in  cotton,  was 
easily  sustained,  and  the  collapse  of  Seymour,  Johnson  &  Co., 
four  days  later,  was  quite  without  effect.  In  June  sentiment  changed  for 
the  worse,  with  bad  news  of  the  wheat  crop  and  the  advent  of  ten-cent 
cotton.  The  market  was  steady,  but  uneventful,  throughout  the  remainder 
of  the  summer.  The  disturbances  in  China,  which  drew  thither  the  atten¬ 
tion  of  the  civilized  ivorld,  the  renominations  of  McKinley  and  Bryan,  and 
the  assassination  of  King  Humbert  of  Italy,  by  the  anarchist  Bresci,  in 

1  This  firm  was  more  active  on  the  Cotton  Exchange  than  in  the  stock  market.  It  consisted  of 
Theodore  H.  and  Walter  W.  Price,  W.  G.  McCormick,  R.  M.  Stuart- Wortley,  and  a  special  partner,  George 
Crocker.  The  failure  was  accompanied  by  a  break  in  cotton  prices.  Mr.  Crocker  publicly  laid  the  disaster 
to  the  “illegitimate  speculations”  of  one  member  of  the  firm,  a  charge  which  Mr.  Theodore  Price  publicly 
resented. 


CULMINATION  OF  AN  ERA 


391 


McKinley’s  re- 
election  hailed 
with  joy. 


July,  were  all  phlegmatically  treated  on  ’Change.  The  death  of  Collis  P. 
Huntington,  builder  of  the  Southern  Pacific  and  ruler  of  the  Chesapeake  & 
Ohio,  which  took  place  at  his  Adirondack  camp  in  August,  was  without 
effect  on  prices. 

In  September  the  market  weakened  momentarily.  An  extensive  strike 
of  anthracite  miners — which  lasted  about  a  month — a  reduction  in  the 
price  of  tinplate,  and  the  cutting  of  the  price  of  steel  rails  from  $35  to  $26 
a  ton,  were  the  depressing  factors.  While  values  improved  in  October,  a 
strong  bull  market  was  yet  impossible.  Rail  orders  were  largely  held  in 
abeyance,  waiting  the  outcome  of  the  election,  although  the  Pennsylvania 
Railroad  placed  a  large  order  promptly  at  the  reduced  price.  The  officials 
of  the  road  had  not  misread  the  future.  On  November  6th 
the  McKinley  and  Roosevelt  ticket  was  swept  into  power  by 
a  decisive  majority.  The  importance  of  this  election  was 
vastly  inferior  to  that  of  1896.  Nevertheless  the  relief  of 
business  men  at  the  second  defeat  of  Bryan  was  profound.  Stocks  opened 
up  one  to  three  points  on  the  day  after  the  election  and  continued  to 
advance,  amid  great  activity,  for  nearly  a  week.1  The  favorable  influence 
of  the  election  on  general  trade  was  made  evident  during  the  same  time. 

The  announcement  of  the  Southern  Pacific’s  control  of  Pacific  Mail,  and 
of  the  plan  to  merge  the  Guggenheim  smelting  business  with  the  Smelters’ 
Trust,  were  both  made  in  November.  On  the  23d  of  the  same  month  a 
new  security,  Amalgamated  Copper,  was  added  to  the  list,  45,000  shares 
selling  between  9914  and  97%,  the  stock  closing  at  98.  The  following  month 
saw  a  vigorous  stock  market,  with  heavy  advances  in  Sugar,  Brooklyn 
Rapid  Transit,  and  the  Coal  shares.  The  Pennsylvania  Coal  Company  had 
been  acquired  by  interests  in  the  Erie,  New  York,  Ontario  &  Western  and 
Delaware  &  Hudson  companies.  The  bulls  hailed  the  merger  as  a  point  in 
their  favor. 

With  the  opening  of  the  new  century  there  began  a  period  of  public 
speculation  so  animated  as  to  suggest  a  new  dispensation.  The  surplus 
accumulated  in  successive  years  of  prosperity  by  men  in  all 
walks  of  life  was  large.  With  its  growth  came  the  desire  of  The 
its  holders  to  increase  it.  The  ensuing  movement  did  not  century  figures 
culminate  until  the  “Northern  Pacific  panic”  of  May,  1901, 
although  several  periods  of  dulness  broke  the  activity  of  the  preceding  four 

1  The  advance  immediately  following  the  national  election  of  1900  may  be  illustrated  by  the  following 
table: 

American  Sugar, 

American  Steel  &  Wire, 

American  Tobacco, 

Consolidated  Gas, 

Federal  Steel, 

Manhattan, 

Metropolitan, 


Low. 

High. 

November  5. 

November  12. 

im 

133% 

35% 

m 

97% 

110 

173 % 

186% 

40 

51% 

97J* 

109% 

159% 

171 

392 


THE  NEW  YORK  STOCK  EXCHANGE 


months.  Excitement  in  the  market  was  pronounced  in  the  first  days  of 
January,  1901.  On  the  fourth  a  new  record  for  activity  was  established 
by  the  sale  of  1,816,581  shares.  Of  this  number  250,000  represented  the 
dealing  in  St.  Paul,  which  stock  ran  from  145  to  158%,  while  Northern 
Pacific  gained  6%  points,  closing  at  88.  St.  Paul  sold  at  162  the  next  day 
and  then  fell  off  five  points.  On  the  seventh  the  market  broadened  to 
2,113,000  shares.  Rumors  of  great  railroad  combinations  were  filling  the 
air  and  tempting  merchant,  manufacturer,  lawyer  and  clerk  to  throw 
judgment  and  sense  of  proportion  to  the  winds  and  buy  at  any  price. 
Several  of  these  rumors  were  well  founded.  The  Philadelphia  &  Reading 
Railway  purchased  the  Central  Railroad  of  New  Jersey  and  the  control  of 
Chicago  Terminal  Transfer  changed  hands.  E.  H.  Harriman  and  his 
associates  also  acquired  the  Huntington  and  Speyer  holdings  and  other 
stock  of  the  Southern  Pacific  Company — a  total  of  75,000  shares — for  the 
Union  Pacific  Railroad  Company,  which  later  made  a  four  per  cent,  issue 
of  bonds  to  finance  the  purchase.1  This  acquisition  gave  the  Union  Pacific 
practical  control  of  the  great  southwestern  property  in  which  it  had  long 
held  an  interest.  The  purchase  by  George  Gould  of  the  control  of  the 
Denver  &  Rio  Grande  and  the  entrance  of  the  Rockefeller  party  into 
Missouri  Pacific  likewise  excited  the  public  mind  during  this  period  of 
unrest. 


BT  was  early  in  1901  that  long  considered  plans  for  a  merger  of  the 
leading  steel  industrials  took  definite  shape.  The  general  fact  that 
economies  were  to  be  effected  by  the  combining  of  these  properties  was 
widely  understood,  but  it  required  the  stimulus  of  danger  to  induce  their 
owners  to  take  action.  This  stimulus  was  provided  by  Andrew  Carnegie. 

Mr.  Carnegie  caused  the  announcement  to  be  made  in  January  that  he 
would  immediately  erect  a  tube  plant  costing  $12,000,000  at  Conneaut 
Harbor,  Ohio,2  and  that  the  Carnegie  Company  would  later 
Andrew  Carnegie  embark  in  the  manufacture  of  tin  plate,  steel  wire  and  sheet 
steel  industrials,  steel*  This  was  primarily  a  blow  at  the  National  Tube  Com¬ 
pany,  a  Morgan  concern  capitalized  at  $80,000,000,  and  con¬ 
trolling  85  per  cent,  of  the  trade  in  wrought  iron  pipe.  Its  business,  which 

1  This  deal  made  the  Union  Pacific  system  one  of  15,000  miles.  The  Southern  Pacific  Company  owned 
all  of  the  Central  Pacific,  on  which  the  Union  Pacific  road  was  dependent  for  its  connection  to  the  coast. 
It  was  the  fear  of  an  ultimate  disturbance  of  that  connection  which  urged  the  Harriman  syndicate  to 
this  purchase.  The  James  Speyer  stock  had  been  bought  about  a  year  previous  from  the  Charles  Crocker 
and  Leland  Stanford  estates, 

2  Conneaut  Harbor  was  the  Lake  Erie  terminus  of  the  Pittsburg,  Bessemer  &  Lake  Erie  Railroad,  a 
Carnegie  property.  It  was  possible  to  ship  finished  products  from  Conneaut  Harbor,  via  Lake  Erie  and 
the  Erie  Canal,  to  New  York  City,  for  five  cents  the  hundredweight,  against  a  railroad  freight  rate  of 
eighteen  cents  from  Pittsburg  to  this  city.  By  establishing  a  plant  of  any  sort  at  Conneaut  Harbor, 
whither  raw  material  could  be  cheaply  shipped  from  Pittsburg,  the  Carnegie  Company  could  undersell 
any  existing  competitors  in  the  New  York  market. 


CULMINATION  OF  AN  ERA 


393 


was  prosperous  in  the  extreme,  was  threatened  with  destruction  by  the 
announcement  of  Mr.  Carnegie.  The  bugaboo  of  water  freights,  thrust 
suddenly  into  view,  obscured  the  prospect  of  dividends  and  even  aroused  in 
timid  souls  vague  fears  of  bankruptcy.  Mr.  Carnegie’s  promise  of  later 
competition  in  other  lines  suggested  the  possibility  of  a  steel  trade  war, 
with  disaster  to  many  investments  in  which  Wall  Street  and  the  public 
had  placed  millions. 

Whether  or  not  it  was  true  that  Mr.  Carnegie’s  threats  were  the  result 
solely,  as  men  alleged,  of  displeasure  at  his  failure  to  get  railroad  freight 
concessions  out  of  Pittsburg,  or  that  he  had  simply  decided  to  retire  and 
to  compel  Mr.  Morgan  and  his  associates  to  assist  him  in  the  process,  the 
effect  of  his  coup  was  irresistible.  It  was  known  that  he  had  the  means, 
and  it  was  believed  that  he  had  the  power,  to  make  good  his  declaration. 
J.  Pierpont  Morgan  recognized  that  the  only  decisive  remedy  lay  in  the 
discovery  and  acceptation  of  Mr.  Carnegie’s  terms.  It  seemed  obvious, 
moreover,  that  if  the  task  of  buying  Mr.  Carnegie  out  were  to  be  under¬ 
taken,  it  were  wise  to  effect  a  consolidation  of  all  of  the  leading  steel  com¬ 
petitors,  and  thus  eliminate  the  possibility  of  war  in  the  steel  trade.  The 
Steel  Trust  was  forced  to  meet  this  situation. 

On  February  6 — less  than  a  month  after  the  Carnegie  outgiving — the 
news  flashed  through  Wall  Street  that  Mr.  Carnegie  had  sold  out  to  the 
Morgan  party,  and  stocks  leaped  upward,  buoyed  by  the  conviction  that  a 
black  cloud  had  rolled  away  beyond  the  horizon  of  finance.  But  the  work 
of  welding  into  one  whole  the  component  parts  of  this  giant  steel  combina¬ 
tion  was  far  from  complete.  Mr.  Carnegie  had  condescended  to  accept 
some  $300,000,000  in  choice  bonds  for  his  steel  holdings.  But  with 
the  leading  directors  in  the  National  Tube,  Federal  Steel,  American  Steel 
and  Wire,  National  Steel,  American  Tin  Plate,  American  Steel  Hoop  and 
American  Sheet  Steel  Companies,  all  of  which  were  comprised  in  the  original 
merger  negotiations,  separate  bargains  had  to  be  struck.  Between  a  maze 
of  conflicting  interests,  jealousies  and  prejudices,  Mr.  Morgan  threaded  his 
way  to  success. 

The  final  details  of  the  steel  merger  were  arranged  at  Mr.  Morgan’s 
office,  late  on  Saturday  afternoon,  February  23d,  after  a  lengthy  con¬ 
ference  of  the  leaders  of  the  various  steel  companies.  On 
Monday  morning  the  news  that  negotiations  had  succeeded,  steef Merger 

and  some  inkling  of  the  terms,  appeared  in  public  print.  The 
steel  stocks  thus  affected  opened  up  sharply  and  advanced  amid  wild 
excitement,  reacting  later.  The  new  giant  among  trusts,  the  United  States 
Steel  Corporation,  was  formed  this  day  in  New  Jersey,  and  on  the  next  Mr. 
Morgan  announced  the  details  of  his  coup  like  a  modern  Caesar  recounting 
his  triumphs  over  the  barbarians. 


394 


THE  NEW  YORK  STOCK  EXCHANGE 


Within  a  few  weeks  the  capital  of  the  new  trust  had  been  fixed  at 
$1,400,000,000  in  stocks  and  bonds,  and  the  entire  country  was  ringing 
with  the  news  of  the  Morgan  achievement.1  From  Maine  to  Texas  small¬ 
bore  investors  rushed  to  the  savings  bank  or  the  woollen  stocking  and 
appeared  as  buyers  of  the  new  securities.  What  prices  they  were  paying 
they  seemed  not  even  to  care  to  understand.  What  mattered  it  that  the 
Illinois  Steel  Company  was  heavily  watered  in  its  formation;  that  the 
Federal  Steel  Company,  which  swallowed  it  and  its  fellows,  was  similarly 
watered  again,  and  that  the  titanic  Morgan  combination  required  still 
more  water  in  its  making?  Let  us  be  agreeable,  said  the  public,  and  for 
water  read  capitalization  of  earnings.  The  newspapers  were  widely  used  to 
explain  the  economies  and  benefits  to  be  gained  by  the  consolidation. 
Equal  publicity  attended  the  company’s  early  business  success,  and,  with 
the  preferred  stock  paying  seven  and  the  common  four  per  cent.,  the  Steel 
Trust  shares  were  tempting  at  the  prices  first  prevailing.  Thus  the  flota¬ 
tion  proved  most  profitable  to  the  insiders.  The  underwriting  syndicate, 
formed  to  effect  the  exchange  of  subsidiary  stocks  for  those  of  the  Steel 
Trust,  was  called  on  only  for  $25,000,000  out  of  the  $200,000,000  pledged, 
and  made  very  handsome  gains  out  of  its  use. 

James  R.  Keene  was  intrusted  with  the  delicate  task  of  actually  getting 
the  steel  stocks  into  the  public’s  hands.  His  handling  of  the  problem 
was  masterly  beyond  doubt.  But  his  signal  success  could  not  have  been 
hoped  for,  with  the  finest  manipulation  known  to  Wall  Street  history, 
had  not  the  public  prosperity  and  the  public  temper  united  to  favor 
his  efforts. 


— the 


ENEATH  all  the  extravagances  of  modern  high  finance  (and  its 
ardent  admirers  must  admit  that  its  failings  do  exist)  there  lies 
fidelity  to  one  principle  which  is  assured  of  permanent  recognition 
principle  of  co-operation.  Its  adoption  comprises  all  that  is 


meritorious  in  the  industrial  movement.  Its  application  to  the  railroad 


1  As  first  made  the  steel  combination  comprised  78  blast  furnaces  with  an  annual  capacity  of  6,500,000 
tons  of  pig  iron,  and  149  steel  works  and  six  finishing  plants  with  a  total  annual  capacity  of  9,000,000 
tons.  The  United  States  Steel  Corporation  was  capitalized  at  $550,000,000  of  preferred  stock,  $550,000,- 
000  of  common,  and  $303,400,000  of  five  per  cent,  first  mortgage  bonds.  The  bonds  were  used  to  redeem, 
at  par,  the  $159,450,000  of  Carnegie  Company  bonds,  held  by  Andrew  Carnegie,  and  to  pay  for  the 
$86,379,000  of  Carnegie  Company  stock  owned  by  Mr.  Carnegie,  and  for  other  shares  held  in  his  family. 
It  is  understood  that  these  favored  holders  turned  in  their  stock  at  150  for  bonds,  and  the  minority 
holders  in  the  Carnegie  Company  got  150  in  new  preferred  and  150  in  new  common  for  their  shares. 

The  Federal  Steel,  American  Steel  &Wire,  National  Tube,  National  Steel,  American  Tin  Plate,  American 
Steel  Hoop  and  American  Sheet  Steel  Company  stocks  were  paid  for  in  United  States  Steel,  preferred  and 
common,  at  rates  fixed  by  Mr.  Morgan,  and  ranging  from  par  to  125.  The  four  last  named  companies 
constituted  the  “Moore  group.”  Judge  Moore  and  his  associates  were  thought  to  have  got  a  dispropor¬ 
tionately  high  price  for  their  holdings,  and  certain  National  Tube  shareholders  loudly  protested.  But 
Mr.  Morgan’s  terms  prevailed,  and  practically  all  of  the  stocks  of  the  constituent  companies  went  into 
the  merger. 

The  American  Bridge  Company  and  the  Lake  Superior  Consolidated  Iron  Mines  were  taken  in  on 
April  1,  and  the  Shelby  Steel  Tube  Company  in  June,  1901.  The  Union  Steel  Company  and  the  Troy  Steel 
Products  Company  were  absorbed  in  1902  and  the  Clairton  Steel  Company  in  1904. 


CULMINATION  OF  AN  ERA 


395 


has  proven,  when  faithful,  satisfactory  in  results.  The  famous  “  community 
of  interest”  idea,  one  of  the  features  of  the  renaissance  of  prosperity, 
was  only  a  plan  to  put  the  co-operative  principle  into  effect. 

Although  the  expansion  of  the  railroad  systems  of  America  has  been 
accompanied  by  a  gradual  lowering  of  freight  rates,  the  public  has  always 
regarded  with  disfavor  the  efforts  of  railroads  to  protect  themselves 
against  over-competition.  With  the  passage  of  years  came  legal  enact¬ 
ments  in  many  States,  forbidding  the  consolidation  of  parallel  roads.  It 
was  to  meet  this  condition,  and  to  prevent  the  destructive 
warfare  in  which  rival  railroad  managers  had  always  been  raUway1™1 
prone  to  engage,  that  the  transportation  kings  devised  the  combinations, 
“community  of  interest”  plan.  They  argued  quite  rightly 
that  if  A,  B,  and  C  are  competing  roads,  and  the  majority  holders  in  each 
are  substantially  interested  in  each  of  the  other  two,  rate  wars  and  kindred 
evils  could  be  easily  avoided.  The  events  leading  up  to  the  famous 
Northern  Pacific  corner  of  1901  were  the  result  of  an  application  of  this 
plan  to  the  Northwest. 

Toward  the  close  of  1900  James  J.  Hill,  the  foremost  railroad  man  of 
America,  and  J.  Pierpont  Morgan  were  working  in  harmony,  with  old 
hostilities  thrust  behind.  Mr.  Hill  had  induced  his  Great  Northern  associ¬ 
ates — such  men  as  John  S.  Kennedy  and  Lord  Stratlicona — to  take  a  large 
interest  in  Northern  Pacific,  and  the  Morgan  party  had  similarly  par¬ 
ticipated  in  Great  Northern  ownership.  In  these  two  united  grounds  the 
control  of  both  properties  was  held.  The  controllers  were  masters  of  the 
Northwestern  situation.  Mr.  Morgan  suggested  to  Mr.  Hill  that  the 
Northern  Pacific  needed  an  easterly  outlet  to  Chicago.  Mr.  Hill  concurred, 
and  to  obtain  it  favored  the  purchase  of  the  Chicago,  Burlington  &  Quincy 
Railroad.  Mr.  Morgan  thought  that  the  Chicago,  Milwaukee  &  St.  Paul 
was  the  road  to  buy.  This  opinion  was  finally  accepted,  and  the  two 
financiers  joined  in  an  attempt  to  get  the  St.  Paul.  Their  effort  was 
vigorously  opposed  by  James  Henry  Smith  and  others  in  the  St.  Paul 
directorate,  and  the  negotiations,  after  much  disagreeable  notoriety, 
ended  in  failure.  Mr.  Morgan  reverted  to  Mr.  Hill’s  idea,  and  it  was 
determined  to  buy  the  control  of  the  Burlington.  Early  in  1901,  after  a 
certain  amount  of  Burlington  had  been  picked  up  in  open  market  and  the 
stock  had  sharply  advanced,  the  allies  learned  that  the  control  of  the  road 
could  be  purchased  privately  at  $200  a  share,  which  could  be  paid  for  in 
four  per  cent,  bonds.  This  would  necessitate  an  issue  of  $218,000,000  in 
bonds,  and  involve  carrying  charges  of  $8,720,000  a  year,  which  exceeded 
the  net  earnings  of  the  Burlington  Road  during  1900,  the  most  profitable 
year  of  its  history.  Messrs.  Morgan  and  Hill  decided  without  hesitation 
that  the  Burlington  road  was  worth  $200  a  share  to  them,  and  thus  the 


396 


THE  NEW  YORK  STOCK  EXCHANGE 


sale  of  the  property  to  the  Northern  Pacific  and  Great  Northern  companies, 
as  joint  owners,  was  completed.1 

The  success  of  this  transaction  became  known  in  March  to  Kuhn,  Loeb 
&  Co.  and  to  Edward  H.  Harriman,  of  the  Union  Pacific  road.  It  was 
regarded  as  a  blow  at  railroad  harmony.  It  threatened  the  prosperity  of 
the  St.  Paul  road  (in  which  Standard  Oil  men  were  interested),  the  Chicago 
&  Northwestern  (a  Vanderbilt  property),  and  the  Missouri  Pacific,  con¬ 
trolled  by  Mr.  Gould  and  the  Rockefellers.  But  the  Union  Pacific  had  most 
to  fear  from  it.  In  Oregon  and  Idaho  and  elsewhere  the  Union  Pacific 
touched  Northern  Pacific  lines,  while  at  Omaha  and  Kansas  City  it  touched 
the  Burlington,  with  which,  indeed,  it  competed  through  Kansas,  Nebraska, 
Colorado,  and  Wyoming.  A  glance  at  the  railroad  map  will  show  that  the 
Hill-Morgan  coup  meant  that  the  Union  Pacific  would  lose  all  the  east- 
bound  freight  it  had  got  from  the  Northern  Pacific,  and  all  the  west-bound 
freight  the  Burlington  had  been  giving  it. 

The  Union  Pacific  interests  made  a  fruitless  appeal  for  the  right  to 
participate  in  the  Burlington  purchase.  Mr.  Morgan  having  completed 
two  huge  transactions,  sailed  for  Europe  early  in  April,  and 
Contest  for  a  Harriman-Kuhn-Loeb-Gould-Rockefeller  union  was  formed 
NortteraPacific.  opposition  to  Messrs.  Morgan  and  Hill.  Shortly  after  this 
Mr.  Schiff,  of  Kuhn,  Loeb  &  Co.,  informed  Mr.  Hill  that  he  and 
his  associates  had  bought  control  of  the  Northern  Pacific  road.  They  had 
in  fact  resolved  on  this  course  as  their  only  protection,  and  had  captured 
the  property,  chiefly  by  private  purchase  of  stock.  The  news  of  Mr.  Schiff’s 
declaration  was  forwarded  abroad  to  Mr.  Morgan,  who  was  then  flushed 
with  the  fresh  triumph  of  having  purchased  the  Leyland  line,  the  third 
largest  steamship  company  of  Great  Britain.  He  sent  an  order  from  Aix 
to  clinch  the  control  of  Northern  Pacific  by  the  purchase  of  150,000  shares 
of  the  common  stock  in  open  market.  This  order  more  than  absorbed  the 
floating  supply,  and  many  from  whom  the  Morgan  brokers  bought  were 
selling  “short.”  When  they  attempted  to  cover  there  was  virtually  no 
stock  to  be  had.  It  was  in  this  way  that  the  famous  Northern  Pacific 
corner  and  succeeding  panics  were  brought  about. 


mm 

HE 


NNOUNCEMENT  of  the  steel  merger  and  of  great  railroad  deals 
had  inflamed  the  public  imagination  by  the  latter  part  of  March, 
and  all  classes  and  conditions  of  men  came  tumbling  into  the 
market  intent  upon  doubling  their  money  in  a  day.  Prices  leaped  up. 


1  The  deal  was  not  formally  announced  until  April  30th,  although  it  was  approved  by  the  Great 
Northern  and  Northern  Pacific  directorates  a  number  of  days  before.  These  two  roads  organized  the 
Chicago,  Burlington  &  Quincy  Railway  Company,  of  which  each  of  them  owned  half,  and  it  purchased  the 
Chicago,  Burlington  &  Quincy  Railroad,  paying  therefor  in  four  per  cent,  bonds  which  were  the  joint 
obligations  of  the  Great  Northern  and  Northern  Pacific. 


CULMINATION  OF  AN  ERA 


397 


Unexampled 

speculation. 


Missouri  Pacific,  not  yet  a  dividend  payer,  touched  par  for  the  first  time 
in  thirteen  years.  All  of  the  leaders  responded  to  the  spur  of  public 
buying,  and  as  April  followed  March,  the  newcomers  felt 
their  appetites  grow  with  what  they  fed  on.  London  sold 
largely  and  gold  went  out  to  pay  her,  but  no  one  cared  a 
whit.  Market  and  intrinsic  values  parted  company.  The  business  of 
commission  houses  swelled  beyond  all  precedent,  and  weary  clerks  toiled 
to  midnight  adjusting  the  accounts  of  lawyers,  grocers,  physicians, 
waiters,  chorus  singers  and  clergymen  who  were  learning  to  acquire 
wealth  without  labor.  Elevated  cars  in  early  morning,  and  hotel  cafes 
at  night,  hummed  with  stock  tips  and  market  gossip.  Time  and  again 
new  records  of  activity  were  established  on  ’Change.  The  dealing  of 
the  “western  contingent”  was  particularly  heavy  and  bull  manipulation 
was  indeed  easy  of  success.  From  every  lip  dropped  stories  of  fortunes 
gained  in  a  week  by  this  or  that  lucky  stroke.  Florists,  jewellers, 
perfumers,  restaurateurs,  modistes  and  vendors  of  automobiles  rejoiced 
in  the  collateral  prosperity  secured  to  them  by  the  boom  in  stocks. 
The  steel  shares,  the  grangers,  and  Amalgamated  Copper— which  ran  to 
130  on  this  bull  movement — were  the  chief  fancies.  Throughout  April 
stocks  soared  far  up  beyond  the  levels  of  reason  and  true  worth,  with  fre¬ 
quent  two-million  share  days,  and  violent  reactions  in  various  issues  tem¬ 
pering  the  advance.  On  April  22d,  for  instance,  when  2,340,000  shares 
changed  hands,  Amalgamated  Copper  opened  4 %  points  off  and  fell  to  117, 
while  St.  Paul  ran  from  170  to  175  and  fell  to  168.  On  the  24th  there 
were  tremendous  buying  orders  in  Union  Pacific,  which  ran  from  below  par 
to  107%,  with  sales  of  650,000  shares — a  new  record  for  activity  in  one 
issue. 


|^gjN  Friday,  April  26th,  the  Stock  Exchange  bade  farewell  to  the  old 
building  in  Broad  Street,  which  it  had  occupied  since  the  days  of 
the  Civil  War.  Upon  its  site  was  to  rise  a  splendid  structure  of 
marble,  a  public  testimonial  of  the  Board’s  prosperity  and  The  gtock  Board 
strength.  Many  of  the  older  brokers  to  whom  life  at  the  removes  to  the 
trading  post  was  only  a  memory,  gathered  on  this  occasion  Produce  Ex- 
for  a  parting  look  at  the  familiar  walls  which  had  re-echoed  change  Buildms- 
their  clamor  a  generation  ago.  Rudolph  Keppler,  President  of  the 
Exchange,  delivered  a  speech  after  the  market’s  close,  and  this  was  the 
farewell  ceremony.  The  brokers  took  Saturday  as  a  holiday,  and  on 
Monday,  April  29th,  opened  business  in  their  leased  and  narrow  quarters 
in  the  Produce  Exchange  Building.  Here  they  remained  till  the  Spring 
of  1903,  when  they  returned  to  Broad  Street  and  entered  their  completed 


398 


THE  NEW  YORK  STOCK  EXCHANGE 


home,  the  acquirement  of  which  — in  its  beauty,  durability  and  commodi¬ 
ousness — is  the  subject  of  a  special  chapter  in  the  present  volume. 

The  first  day’s  trading  on  the  leased  floor  was  enormous— running  to 
2,616,000  shares,  with  Union  Pacific  selling  up  to  130, 1  and  Northern 
Pacific  advancing  from  109%  to  119%,  while  the  whole  market  responded 
to  their  lead. 


On  the  next  day  came  formal  news  of  the  Burlington  deal  and  a  burst 
of  the  wildest  trading.  Burlington  stock  sold  at  199%.  Erie  ran  above 
43. 2  Steel  common  climbed  to  55  and  the  preferred  touched 
101%.  The  total  sales  printed  on  the  tape  were  3,270,000  April  30,1901, 

shares,  a  new  record  of  activity  and  one  never  equalled  since,  ^ord  day. 

The  first  two  days  of  May  witnessed  excitement  scarcely 
less  fervid,  with  a  leap  in  Atchison,  promoted  by  a  fiction,  but  on  the 

1  There  is  reason  to  believe  that  the  unstinted  buying  of  Union  Pacific  at  this  time  was  due  to  an  effort 
of  the  Hill-Morgan  party  to  obtain  control  of  it,  and  that  it  was  not  until  they  failed  in  doing  so  that  they 
decided  to  protect  themselves  by  purchases  of  Northern  Pacific  stock. 

2  It  will  be  noticed  that  the  Burlington  deal  created  a  Hill-Morgan  trans-continental  system,  consisting 
of  the  Erie,  Burlington  and  Northern  Pacific  roads. 


CULMINATION  OF  AN  ERA 


399 


third  day  a  heavy  reaction  set  in,  from  which  the  market  list  finally 
recovered. 

On  Monday  morning,  May  6th,  Northern  Pacific  common,  in  which 
London  buying  had  been  heavy,  opened  at  116%,  six  and  a  half  points 
higher  than  the  night  before,  and  the  price  shot  up  to  133— one  brokerage 
firm  which  acted  for  J.  P.  Morgan  &  Co.  absorbing  150,000  shares,  or  one- 
fifth  of  the  outstanding  issue.  On  Tuesday,  the  delivery  of  this  stock,  which 
had  been  loaned  out  in  the  usual  way,  was  demanded.  The  frightened 
shorts  had  forced  the  price  almost  to  150  this  day,  and  after  the  market’s 
close,  a  panic  in  the  loan  crowd,  and  the  fixing  of  a  ten  per  cent,  premium 
to  carry  “  little  Nipper  ”  over  night,  showed  how  heavily  the  market  was 
oversold.  The  Morgan  house  had  bought  more  stock  than  could  be  deliv¬ 
ered.  Not  only  were  the  bear  traders  caught  between  the  upper  and  nether 
millstones,  but  the  arbitrage  houses,  which  had  sold  stock  that  must  await 
arrival  from  Europe,  were  suddenly  abreast  of  ruin.  With  “  Nipper’s  ”  wild 
up-rush  to  180  on  Wednesday  the  Street  recognized  the  gravity  of  the 
peril,  and  in  the  afternoon  began  the  descent  in  other  securities  which  was 
to  eventuate  in  panic.  St.  Paul  dropped  well-nigh  twenty  points  to  161%, 
Union  Pacific  fell  from  130  to  112%,  and  other  such  recessions  proclaimed 
that  an  hour  of  reckoning  had  come,  and  that  the  unreasoning,  outrageous 
speculation  of  preceding  weeks  must  now  produce  its  natural  fruits.  The 
break  was  ominous  enough  to  perturb  the  country,  and  the  general  disqui¬ 
etude  was  not  lessened  by  the  succeeding  struggle  in  the  loan  crowd,  where 
the  right  to  borrow  Northern  Pacific  over  night  commanded  a  premium  of 
45  per  cent.1 

On  the  morrow,  the  storm  broke  in  all  its  fury.  The  market  steadied 
itself  a  bit  on  Thursday  morning,  for  a  moment  deceiving  the  eye.  But 
Northern  Pacific,  which  had  opened  ten  points  up,  at  170, 
began  at  once  to  climb.  It  fell  off  but  for  a  moment  and  then 
rose  between  two  sales  from  159  to  205,  a  leap  which  foretold 
ruin  to  the  unhappy  shorts,  the  passing  of  countless  paper 
fortunes,  the  destruction  of  a  city  of  shimmering  castles  in  the  air. 
Great  quantities  of  securities,  thrown  overboard  by  Northern  Pacific 
shorts  in  their  desperate  need  of  money,  fell  upon  the  market,  and  as 
prices  receded,  one  speculative  account  after  another,  closed  out  by  fright¬ 
ened  brokers,  added  to  the  growing  panic.  Northern  Pacific  sold  at  230, 

1  Neither  the  Hill-Morgan  nor  the  Union  Pacific  party  was  willing  to  keep  Northern  Pacific  stock  loaned 
out ;  each  feared  that  by  lending  its  shares  it  might  unwittingly  be  throwing  them  into  the  enemy’s  camp. 
However,  it  was  realized  that  an  absolute  refusal  to  lend  would  bankrupt  not  only  the  houses  acting  for 
the  bear  traders,  but  also  the  arbitrage  houses,  which  could  not  deliver  stock  until  the  arrival  of  steamers, 
and  which  certainly  deserved  consideration.  A  proposal  to  pool  stock  and  lend  to  the  shorts  in  proportion 
to  holdings  was  made  by  Kuhn,  Loeb  &  Co.  to  the  house  of  Morgan,  but  not  accepted.  It  was  finally 
agreed  on  the  9th  that  each  house  should  permit  those  brokers  who  had  sold  it  short  stock  to  settle  at 
$150  a  share.  The  price  fixed  for  London  shorts  by  Mr.  Morgan  was  $140.  The  corner  developed  a 
“backwardation”  of  15  to  20  points  in  Capel  Court. 


Panic  of  May  9, 
1901;  Northern 
Pacific  at 
$1,000  a  share. 


400 


THE  NEW  YORK  STOCK  EXCHANGE 


“regular;”  then  came  “cash”  sales  at  300  and  400,  a  “regular”  sale  at 
320,  and  a  sale  of  100  shares,  “cash,”  at  650.  After  eleven  o’clock  the 
price  of  regular  stock  touched  700,  and  three  hundred  shares  sold  “cash” 
at  $1,000  a  share,  R.  H.  Thomas  paying  the  price  to  Street  &  Norton. 

Money  had  now  reached  seventy  per  cent,  and  the  panic  was  at  full 
height.  Union  Pacific  dropped  .from  105  to  89  in  eight  sales,  and  then 
declined  to  76.  Delaware  &  Hudson  fell  from  163  to  105  on  moderate 
trading  but  recovered  before  orders  at  limits  anywhere  near  this  price 
could  reach  the  Board  for  execution.  St.  Paul  sold  at  134,  Steel  common 
at  24,  and  the  whole  speculative  fabric  came  crashing  down  upon  its 
builders,  annihilating  in  an  hour  the  profits  and  hopes  of  a  long  campaign. 

The  announcement  by  brokers  for  the  warring  financiers  that  no 
Northern  Pacific  stock  would  be  called  that  day,  and  the  sudden  formation 
of  a  money  pool  for  $19,500,000 1  (consisting  of  fourteen  banks  and  one 
banking  house),  checked  the  panic  about  mid-day,  at  a  time  when  if  current 
prices  were  to  be  the  test  the  great  majority  of  Stock  Exchange  houses 
might  have  been  termed  insolvent.  Then  began  a  rally  well-nigh  as  violent 
as  the  decline.  The  day  ended  without  a  failure  on  ’Change,  and  Friday, 
the  10th,  witnessed  one  of  the  most  rapid  stock  advances  remembered  by 
the  Street.  Northern  Pacific,  which  closed  on  Thursday  at  325,  dropped 
on  Friday  to  150,  at  which  price  the  rival  captains  of  finance  had  mutu¬ 
ally  agreed  to  permit  the  shorts  to  cover.  The  automatic  corner  had 
ended  and  with  it  the  greatest  public  movement  in  the  annals  of  stock 
speculation. 

Northern  Pacific  stagnated  and  the  market  naturally  was  nervous  and 
far  from  broad  in  the  weeks  just  succeeding  the  panic.  A  spurt  in  “  Nipper” 
from  160  to  205  on  the  23d — probably  due  to  the  effort  of  some  belated 
London  bear  to  cover  sales  made  in  Capel  Court — and  a  drop  in  Union 

1  This  pool  was  organized  by  Frederick  G.  Tappen,  of  the  Gallatin  National  Bank,  at  the  timely  sugges¬ 
tion  of  Frederick  Edey,  of  H.  B.  Hollins  &  Co.,  and  the  money  was  loaned  at  forty  to  sixty  per  cent.,  the 
rate  afterward  falling.  Following  is  a  table  indicating  the  spring  rise,  the  effect  of  the  panic  on  stock 
prices,  and  the  subsequent  recovery : 


Low. 

High. 

Low. 

High. 

Stock. 

Jan.  2. 

May  7. 

May  9. 

May  10. 

Amal.  Copper, 

93% 

123% 

90 

117% 

Amer.  Sugar, 

.  140 

151% 

135 

145 

Atchison, 

47% 

87% 

43 

74% 

Brook.  R.  T., 

84% 

84% 

68% 

77% 

Chi.,  M.  &  St.  P.. 

■  147% 

187 

134 

158% 

Del.  &  Hud., 

129 

179 

105 

160 

Erie,  .... 

26% 

42% 

24% 

36% 

Manhattan, 

.  115J4 

127% 

83 

115% 

Mo.  Pacific, 

71  % 

116% 

72 

108 

Northern  Pacific, 

84  % 

149% 

159* 

200 

N.  Y.  Central, 

.  144% 

165 

140 

154% 

So.  Pac., 

43% 

56% 

29 

49 

Tex.  Pac., 

25% 

51% 

27 

46 

Un.  Pac., 

81% 

130% 

76 

112 

U.  S.  Steel,  com., 

53 

24 

45 

U.  S.  Steel,  pref., 

100% 

69 

94 

*From  this  price  No.  Pac.  rose  to  “  1000  cash  ”  on  the  same  day. 


CULMINATION  OF  AN  ERA 


401 


-Pacific  because  of  an  application  to  list  $100,000,000  of  bonds,  were  the 
market  features  in  the  latter  part  of  May. 

At  the  end  of  May  the  market  was  gratified  with  the  news  that  the 
railroad  kings  had  settled  their  quarrel  and  decided  to  leave  the  composi¬ 
tion  of  the  Northern  Pacific  directorate  to  J.  Pierpont  Morgan  on  his 
return.  The  organization  of  the  United  States  Shipbuilding  Company, 
comprising  the  most  important  plants  in  its  line;  Charles  M.  Schwab’s 
acquisition  of  the  Bethlehem  Steel  Company  control,  which  went  to  the 
Shipbuilding  Trust  later ;  an  increase  in  Amalgamated  Copper  capitaliza¬ 
tion  from  $75,000,000  to  $155,000,000  to  acquire  two  rival  companies, 
and  good  crop  reports,  stimulated  bullish  activity  in  June.  The  failure  of 
the  Seventh  National  Bank,  under  unpleasant  circumstances,  caused  a 
recession  toward  the  month’s  end.  On  July  2d,  the  first  dividend  on  Steel 
common — 1  per  cent.1 — was  declared,  and  on  the  following  day, Wednesday, 
the  Exchange  took  a  holiday  until  the  next  Monday.  The  brokers 
returned  on  the  8th  to  find  that  a  frightful  drought  had  greatly  impaired 
the  corn  crop  and  injured  the  growing  oats  and  hay  in  Kansas,  Missouri 
and  the  Northwest.2  The  result  was  an  immediate  and  violent  decline, 
the  weakness  extending  through  three  days,  and  still  recalled  as  “the 
corn  scare  of  1901.”  After  a  sharp  recovery  in  mid- July,  based  on  Mr. 
Morgan’s  announcement  of  his  choice  of  Northern  Pacific  directors,  prices 
melted  away  once  more.  This  weakness  was  due  to  an  extensive  strike  of 
the  American  Sheet  Steel  and  Steel  Hoop  Companies’  employees,  which 
lasted  throughout  the  summer  and  ended  in  the  men’s  defeat.  Toward 
the  latter  part  of  August  signs  of  the  strike’s  collapse  initiated  a  fresh 
advance,  and  general  sentiment  was  quite  cheerful  when  Wall  Street  was 
once  more  plunged  into  gloom  by  the  assassination  of  President  McKinley. 

Mr.  McKinley  was  shot  by  the  anarchist,  Czolgosz,3  about  four  o’clock 
on  Friday  afternoon,  September  6th,  while  engaged  in  kindly  greeting 
his  fellow-countrymen  at  the  Pan-American  Exposition  in 
Buffalo.  A  wave  of  horror,  not  only  at  the  crime,  but  at  the  Assassination 
thought  that  anarchists  would  select  the  ruler  of  this  free  McEniey1^ 
land  for  assassination,  swept  over  the  Union,  while  fear  that 
McKinley’s  removal  might  endanger  the  fabric  of  prosperity  he  had 
erected  crept  into  the  hearts  of  millions.  Early  on  Saturday  morning  the 

1  It  was  not  known  until  several  days  later  that  this  dividend  was  intended  as  a  quarterly  one. 

2  The  corn  crop  of  1901  amounted  to  1,522,519,000  bushels,  against  2,105,102,000  in  1900. 

3  Leon  F.  Czolgosz  made  one  of  a  line  of  people  who  entered  the  Temple  of  Music  to  shake  the 
President’s  hand.  Upon  reaching  Mr.  McKinley  he  drew  a  revolver  rapidly  and  fired  two  shots  into  the 
body  of  his  victim.  One  of  them  was  extracted  a  few  hours  later,  but  the  other,  which  perforated  the 
walls  of  the  stomach  and  caused  gangrene,  could  not  be  reached  by  the  surgeons.  Czolgosz  was  nearly 
killed  by  infuriated  witnesses,  but  the  police  saved  him  for  the  fate  of  a  speedy  trial,  and  for  death,  on 
October  29th,  in  the  electric  chair. 

Mr.  McKinley  was  taken  to  the  Emergency  Hospital  at  first  and  there  submitted  to  an  operation.  He 
was  carried  thence  to  the  home  of  John  G.  Milburn,  in  Buffalo,  where  he  remained  till  his  death.  He  bore 
his  suffering  with  unflinching  courage  throughout. 


402 


THE  NEW  YORK  STOCK  EXCHANGE 


Clearing  House  Committee  and  Messrs.  Morgan,  Baker,  Stillman,  and 
Woodward  met  at  the  Clearing  House  to  take  such  measures  as  might 
prevent  a  stampede.  This  would  have  been  inevitable  had  the  public  been 
deeply  engaged  in  speculation.  As  it  was,  the  market  opened  two  or  three 
points  off  and  fell  away  sharply.  It  recovered  upon  the  news  that  powerful 
bankers  stood  ready  to  aid  it,  if  necessary,  yet  the  day’s  trading  resulted 
in  severe  losses.  By  Monday  the  sending  of  favorable  bulletins  from 
Buffalo  had  encouraged  the  public  mind,  and  security  prices  advanced, 
only  to  recede  on  the  morrow  with  news  that  the  nation’s  sufferer  had 
weakened.  On  Friday  it  was  plain  that  Mr.  McKinley  was  fated,  and 
stocks  gave  way  to  the  demoralization  which  marks  the  shattering  of 
ardently  cherished  hopes.  But  the  force  of  the  depression  soon  spent 
itself.  Very  early  in  the  morning  of  Saturday,  the  14th,  the  President’s 
ordeal  was  ended  by  death.  The  Stock  Exchanges  of  New  York  and 
London  were  closed  this  day  and  on  the  19th,  when  his  body  was  entombed 
at  his  Ohio  home.  The  calamity  had  ceased  to  be  a  market  factor. 
Theodore  Roosevelt,  in  succeeding  to  the  Presidency,  had  solemnly  avowed 
his  will  to  carry  on  the  policy  of  his  predecessor,  and  the  world  soon 
recognized  that  the  loss  of  no  one  man  can  bid  “Halt!”  to  the  American 
people. 


MALGAMATED  Copper,  the  most  salient  instance  in  modern  times 
of  the  ease  with  which  unknown  securities,  backed  by  great  names, 
can  be  foisted  upon  the  public  at  fictitious  prices,  was  an  exception 
to  the  rule  that  stock  values  scored  net  gains  in  the  prosperous  year  of 
1901,  when  a  great  wheat  crop  offset  the  failure  in  corn,  and  general 
business  flourished.  This  security  had  caught  the  public  eye 
Flotation  of  when  the  magic  of  Standard  Oil  first  touched  the  enterprise, 

Coppframated  and  foolish  buying  had  carried  it  far  above  the  danger  level. 

In  September  it  fell  from  an  eight  to  a  six  per  cent,  basis, 
and  quickly  thereafter  the  Street  learned  that  the  Amalgamated  Company 
was  carrying  130,000,000  pounds  of  accumulated  electrolytic  copper, 
held  at  16%  cents  a  pound,  and  marketable  at  some  much  lower  figure. 
The  subsequent  decline  in  staple  copper  prices,  both  here  and  abroad, 
caused  heavy  liquidation  in  all  copper  stocks  during  the  fall  of  1901. 
The  general  market  endured  it  well,  aided  by  an  increase  in  the  Atchison 
dividend,  the  formation  of  the  Northern  Securities  Company  in  November, 
and  a  favorable  message  in  December  from  the  President.  But  week 
by  week  Amalgamated,  once  eagerly  sought  at  130,  fell  away  in  value, 
till,  on  December  17th,  just  preceding  its  reduction  to  a  four  per  cent, 
dividend  basis,  it  sold  at  60%.  The  year  ended  with  some  uncertainty. 


CULMINATION  OF  AN  ERA 


403 


Strength  marked  the  first  days  of  1902,  but  the  bankruptcy  of  the 
asphalt  and  crude  rubber  trusts,  and  a  fresh  cut  in  copper  staples,  chilled 
all  enthusiasm  for  the  advance.  Amalgamated  never  again  approached 
the  levels  of  its  former  glory,  and  its  collapse  was  doubtless  largely 
responsible  for  the  fact  that,  though  stock  prices  made  new  high  levels 
in  1902,  the  public  did  not  return  to  the  market  in  force. 

Speculative  interest  throughout  the  year  was  keenest  in  the  formation 
of  the  Northern  Securities  Company,  which  the  warring  railroad  magnates 
had  devised  to  settle  their  quarrel.  Mr.  Morgan  had  selected  distinguished 
representatives  of  the  Great  Northern,  St.  Paul,  Vanderbilt, 

Union  Pacific,  and  Pennsylvania  interests  as  Northern  Pacific  The  Northern 

directors,  and  named  William  K.  Vanderbilt  future  referee  of  company, 

all  disputed  questions  affecting  the  railroads  whose  owners 
united  in  this  love  feast.  It  was  with  a  view  to  promoting  further  harmony 
and  perpetuating  the  community  of  interest  plan  in  the  Northwest  that  he 
organized  the  Northern  Securities  Company,  which  was  formed  in  New 
Jersey  to  hold  control  of  the  Great  Northern  and  Northern  Pacific  Com¬ 
panies  and  protect  the  Northwest  situation.1  Hostility  to  it  promptly 
appeared  in  Minnesota,  whose  Attorney  General  began  proceedings  in  the 
United  States  Court  to  stop  the  merger,  and  similar  action  was  taken  by 
the  State  of  Washington.  It  remained,  however,  for  the  Federal  Govern¬ 
ment  to  bring  the  suit  that  proved  actually  successful  in  frustrating  these 
financial  plans.2 

Naturally  enough,  the  Street  at  first  regarded  the  Northern  Securities 
Company  as  the  great  guarantor  of  railroad  peace,  well  knowing  that  if 
it  stood  the  test  of  law,  similar  corporations  would  eventually  be  formed 
to  solidify  railroad  ownership  in  America.  The  prospects  of  success  or 
failure  of  this  enterprise  dominated  Wall  Street  for  a  considerable  portion 
of  1902.  News  that  the  President  had  instructed  Attorney-General 
Knox  to  bring  suit  to  estop  the  merger  fell  upon  the  market  February 
20th,  causing  a  quick  recession  in  prices,  and  Mr.  Knox  filed  his  bill  in 
the  United  States  Court  for  Minnesota  early  in  March.  Sentiment  created 
by  this  action  was  a  controlling  force  in  repressing  speculation  for  the 
advance  until  July.  It  was  well  supplemented,  however,  by  other  adverse 
influences. 


1  The  Northern  Securities  Company  was  capitalized  at  $400,000,000,  and  exchanged  its  shares  for 
Great  Northern  stock  (of  which  $125,000,000  was  outstanding),  at  180,  and  for  Northern  Pacific  (which 
had  $75,000,000  of  common  and  $80,000,000  of  preferred  stock  issued),  at  115.  The  Northern  Pacific 
preferred  stock  was  retired,  being  paid  for  in  four  per  cent.  Northern  Pacific  bonds,  which  were  convertible 
into  common  stock,  and  could  thus  be  exchanged  for  Northern  Securities  stock  at  115.  The  Union  Pacific 
party,  by  virtue  of  ownership  in  Northern  Pacific,  acquired  an  interest  of  something  more  than  twenty  per 
cent,  in  the  Northern  Securities  Company. 

2  The  Government’s  activity  in  this  matter  was  the  most  notable  illustration  of  Mr.  Roosevelt’s  policy 
of  enforcing  the  law  against  promoters  of  great  combinations  whose  methods  he  believed  to  be  illegal. 
This  policy  is  believed  to  have  engendered  much  hostility,  on  the  part  of  financial  leaders,  against  the 
President.  However,  it  certainly  increased  his  public  popularity. 


404 


THE  NEW  YORK  STOCK  EXCHANGE 


Early  in  February  Metropolitan  stock  weakened  materially,  on  the 
announcement  of  the  Metropolitan  Securities  Company,1  and  the 
accompanying  news  that  the  road  had  not  been  earning  its  dividends 
was  ill  taken  by  the  trade.  Through  March  the  market  lacked  interest, 
but  early  in  the  following  month  the  Louisville  &  Nashville  corner  startled 
it  into  life.  The  corner  resulted  from  the  temerity  of  John  W.  Gates,  who 
purchased  in  open  market  the  control  of  the  road,  and  involved  August 
Belmont  and  his  associates  in  an  unfortunate  predicament. 

The  Louisville  property  had  $50,000,000  of  stock  outstanding  and 
had  authorized  the  directors,  several  years  before,  to  issue  at  will  50,000 
shares  of  new  stock.  These  shares  were  issued  in  the  Spring 
How  Louisville  Qf  1902,  but  were  not  yet  listed,  when  Mr.  Belmont  (who 
Changed  owners  believed  that  he  controlled  the  road)  sold  50,000  shares  on 
’Change,  borrowing  them  for  delivery  until  the  listing  of  the 
new  stock,  a  formality  requiring  thirty  days’  previous  notice,  could  be 
affected.  The  heavy  purchases  of  Gates  and  friends  caught  Belmont  short 
of  the  shares,  and  between  April  8th  and  14th  the  price  of  the  stock  ran 
from  107%  to  133,  while  the  general  market  weakened  in  fear  of  the 
outcome.  A  settlement  with  Belmont  and  other  shorts  was  affected  on 
some  basis,  however,  and  on  the  15th  Mr.  Gates’s  firm  announced  that 
they  had  captured  the  road,  and  J.  P.  Morgan  &  Co.,  for  whom— as 
some  skeptics  profess — Mr.  Gates  may  really  have  been  acting,  told  the 
public  that  the  control  of  Louisville  &  Nashville  had  been  deposited  with 
them  to  use  as  they  saw  fit.  Trading  in  Southern  Railway  common,  which 
ran  from  34%  to  40%,  aggregated  nearly  900,000  shares  this  day,  the 
Street  believing  that  a  merger  between  the  two  roads  was  planned.  But 
the  Louisville  passed  into  the  hands  of  the  Atlantic  Coast  line  before 
the  year  was  ended. 

Close  upon  the  Louisville  corner  came  the  collapse  of  the  Hoadley 
stocks  and  of  the  Webb-Meyer  syndicate,  and  the  failure,  on  May  2d,  of 
three  brokerage  houses  which  acted  for  the  syndicate.  The  securities 
associated  with  the  names  of  Dr.  W.  Seward  Webb  and  A.  L.  Meyer  were 
chiefly  of  the  class  which  Street  jargon  describes  as  “cats  and  dogs,”  but 
their  slaughter  created  an  impression  and  weakened  the  market  because 
of  Dr.  Webb’s  connection  with  the  Vanderbilt  family.  Prices  in  general 
had  barely  recovered  from  this  blow  when  an  anthracite  coal  strike, 

1  This  transaction,  which  was  bitterly  but  unsuccessfully  opposed  in  the  courts  by  leading  share¬ 
holders,  was  planned  to  provide  the  Metropolitan  Company  with  cash  for  needed  improvements.  The 
Metropolitan  Securities  Company,  with  a  capital  of  $30,000,000,  all  underwritten,  was  to  acquire  a 
concern  called  the  Interurban  Street  Railway  Company,  which  would  lease  the  Metropolitan  Street 
Railway  Company  at  seven  per  cent,  on  the  stock.  The  Interurban  was  to  get  $23,000,000  in  cash, 
provided  by  the  Metropolitan  Securities  Company  for  effecting  the  aforesaid  improvements,  and  the  latter 
concern  (in  which  Metropolitan  Street  Railway  shareholders  were  entitled  to  invest  to  the  extent  of  forty- 
five  per  cent,  of  their  holdings)  was  to  receive  assets  of  the  Metropolitan  Street  Railway  Company  to  the 
amount  of  $24,500,000. 


CULMINATION  OF  AN  ERA 


405 


piloted  by  John  Mitchell,  came  into  sight.  A  liquidating  movement  set 
in,  culminating  on  May  19th,  and  then  began  a  gradual  four  months’ rise, 
which  carried  stocks  to  the  highest  levels  yet  established.1 

John  W.  Gates  effected  a  profitable  upward  turn  in  corn  and  attempted 
in  vain  to  seize  control  of  the  Colorado  Fuel  and  Iron  Company  this 
summer.  The  bringing  out  by  the  western  contingent  of  a  reorganization 
plan  for  the  Rock  Island  road,  involving  a  large  constituent  of  water ;  the 
recurrence  of  negotiations  to  end  the  coal  strike,  and  the  entrance  of  the 
St.  Paul  road  upon  a  seven  per  cent,  basis,  were  other  features  of  the 
season.  The  market  steadily  gained  ground  until  September,  when  knowl¬ 
edge  of  the  bounteous  crops  assured  for  the  year,  evidence  of  the  country’s 
continued  prosperity,  and  conviction  that  the  coal  strike  must  soon 
collapse,  led  to  a  foolish  upbidding  of  prices.  Suddenly  the  exigencies  of 
the  annual  crop  drain  descended  upon  the  Street  and  found  the  traders 
unprepared.  The  crest  of  the  forward  movement  was  reached  on  September 
20th,  St.  Paul  leading  the  market  and  selling  at  198%;  but  the  publication 
of  the  bank  statement,  showing,  not  a  surplus  reserve  but  a  reserve  deficit 
of  $1,642,000,  brought  on  liquidations,  and  stocks  began  that  long  year’s 
downward  journey  which  has  since  furnished  economists  and  moralists  so 
fine  a  theme  and  has  been  succeeded  by  so  signal  a  recovery. 

The  latter  part  of  September  gave  evidence  of  an  approaching  tight 
money  crisis,  wrhich  Leslie  M.  Shaw,  the  new  Secretary  of  the  Treasury, 
checked  by  permitting  the  banks  to  hold  no  reserve  against  the  $130,000,- 
000  of  Government  money  deposited  with  them.  The  news  was  rather 
favorable  during  the  closing  months  of  1902.  President  Roosevelt  effected 
a  settlement  of  the  coal  strike  in  October,  his  party  was  victorious  at  the 
Congressional  elections,  and  in  December  the  consolidation  of  the  Man¬ 
hattan  Railway  system  with  the  Interborough  Rapid  Transit  Company  — 
a  consolidation  effected  on  sound  lines — improved  the  general  feeling.  But 
the  hardness  of  call  money  offset  these  favorable  features.  Recession  after 
recession,  with  recoveries  that  never  were  complete,  came  in  November  and 
December.  In  the  middle  of  the  latter  month  leading  financiers  made  up  a 
pool  for  $50,000,000,  in  order  to  assist  the  brokers  in  time  of  monetary 
stringency.  This  was  the  so-called  “faith  cure”  fund,  which  invited  the 
shafts  of  wits,  while  it  actually  accomplished  good  in  reassuring  and  hold¬ 
ing  the  market  through  the  last  fortnight  of  the  year. 


1  Following  is  a  table  indicating  the  rise  of  the  summer  of  1902 : 


Stock. 

Low, 

May  19. 

High, 
Sept.  20. 

Amal.  Copper, 

66ft 

68ft 

Amer.  Sugar,  . 

125ft 

131ft 

Atchison,  . 

77% 

95ft 

Chic.,  M.  &  St.  P.,  . 

165ft 

198ft 

Erie,  .... 

35ft 

41ft 

Manhattan,  . 

130ft 

138ft 

Mo.  Pac., . 

27% 

123ft 

Stock. 

Low, 

May  19. 

High, 
Sept.  20. 

N.  Y.  Cent.,  .  . 

153ft 

165ft 

Penn., 

147ft 

169ft 

Reading,  . 

59ft 

73ft 

So.  Pac.,  . 

63 

80 

Union  Pac., 

102ft 

115ft 

U.  S.  Steel,  com.,  . 

38ft 

42 

U.  S.  Steel,  pfd., 

88ft 

92 

406 


THE  NEW  YORK  STOCK  EXCHANGE 


ALL  Street’s  story,  grim,  portentous,  dull,  tragic,  fairy-like  and 
foolish  by  turns,  has  been  carried  in  this  work  to  the  point  where 
all  the  noteworthy  features  of  “high  finance”  are  bare  to  the  eye 
of  the  observer.  The  weaknesses  of  modern  methods  have  been  made  plain 
in  the  simple  telling  of  fact.  In  a  measure  they  will  always  be  seen 
in  the  Street,  so  long  as  wealth  gives  power  and  breeds  greed 
Thus  “ends  this  and  men  fan  short  of  perfection,  though  the  passage  of  years 
f ui'hi story6” t_  may  bring  such  follies  into  ever  greater  discredit.  Enterprises 
like  the  flotation  of  the  ill-starred  Shipping  and  Shipbuilding 
Trusts  of  1902  (whose  securities  have  caused  enormous  losses  though 
never  admitted  to  the  activity  of  the  Exchange)  are  not  the  real  types, 

as  some  men  assert,  of  modern 
finance.  They  are  the  bastards 
of  prosperity,  too  likely  to  pass 
at  first  in  the  public  eye  as 
true  children  of  the  house.  In 
all  periods  of  Stock  Exchange 
history,  chicanery,  over-capital¬ 
ization  and  the  spirit  of  gambling 
have  existed,  to  the  public  injury. 
The  real  and  salient  product  of 
Twentieth  Century  finance  is 
the  application  to  business  mat¬ 
ters  of  principles  centuries  ago 
accounted  sound .  The  consolida¬ 
tion  of  investments,  that  har¬ 
mony  of  purpose  may  estop 
ruinous  competition,  and  the 
union  of  industrial  companies 
beneath  conditions  which  give  each  its  meet  work  to  do,  carry  the 
products  of  each  to  the  nearest  market  and  avoid  senseless  duplication 
of  effort — these  are  but  the  outcroppings  of  the  vein  of  co-operation  in  the 
economic  field.  The  realization  that  good  service  to  the  public  and 
free  expenditure  for  betterments  repay  capital,  in  the  long  run,  has  grown 
widely  prevalent  among  the  great  latter-day  financiers.  But  these  prin¬ 
ciples  are  old  and  of  proven  worth.  The  ideas  have  dominated  sound  and 
honest  minds  since  our  cave-dwelling  ancestors  set  prices  on  their  flint 
knives  and  strove  to  lay  up  wealth. 

Some  acute  observers — notably  Mr.  James  J.  Hill — hold  that  industrial 
prosperity  reached  a  climax  and  began  a  recession  in  1902.  Doubtless  the 
stock  market  declines  which  were  in  progress  when  the  Stock  Exchange 
entered  its  new  home,  in  the  spring  of  1903,  were  accompanied  by  a  natural 


ENTRANCE  TO  SAFE  DEPOSIT  VAULT  OF  THE 
NEW  EXCHANGE. 


CULMINATION  OF  AN  ERA 


407 


lessening  of  good  times.  The  country  has  since  recovered  and  is  highly 
prosperous  now,  despite  the  enormous  flotation  of  new  securities  which 
inspires  occasional  alarm.  Thus  far  it  has  prospered  only  the  more  from  a 
two-fold  demand  for  its  products  and  manufactures — and  the  consequent 
inflow  of  foreign  money, — engendered  by  the  world-transforming  Russo- 
Japanese  war,  while  hopes  of  still  further  good  fortune,  to  follow  the 
renewal  of  peace,  are  prevalent  as  we  bring  this  history  to  a  close.  Beneath 


INTERIOR  OF  VAULT 


the  great  industrial  progress  of  the  last  decade,  one  great,  all-comprising 
fact  exists  to  justify  much  that  seems  extravagant  and  palliate  much  that 
we  regret.  This  is  a  growing  country.  Its  farmers  raised  crops  worth  two 
billions  and  a  half  in  1902.  We  exult  and  boast  that  America  grows.  Let 
us  on  the  same  ground  forgive  the  two  billions  and  a  half  of  new  securities 
listed  in  the  succeeding  year.  South  and  West  the  nation  is  expanding  at 
a  rate  which  dazzles  the  world  when  expressed  in  figures  and  astounds  the 
eyes  of  our  European  brothers.  So  long  as  we  continue  to  draw  recruits 
from  old  world  lands,  and  to  foster  the  moral  and  mental  training  of  new 
generations,  so  long  will  American  property  increase  in  worth,  and  each 
succeeding  era  of  speculative  enthusiasm  will  leave  after  its  recession  the 
values  of  honest  securities  higher  than  they  lay  when  the  preceding  wave 
had  flowed  and  ebbed. 


. 


Ill 


THE  NEW  STOCK  EXCHANGE 


By 


JOHN  RODEMEYER 


Ill 

THE  NEW  STOCK  EXCHANGE 

BY 

JOHN  RODEMEYER 


HE  new  Stock  Exchange  was  the  outgrowth  of  a  necessity 
for  better  and  ampler  facilities  and  enlarged  board-room 
capacity.  With  the  large  active  membership,  and  the 
rapidly  increasing  volume  of  transactions  during  recent 
years,  the  conviction  had  been  growing  for  a  long  time 
that  the  New  York  Stock  Exchange  should  and  must 
have  a  home  which,  in  the  convenience  of  its  equipment,  the  amplitude 
of  its  dimensions  and  the  comfort  and  elegance  of  its  appointments,  would 
be  in  keeping  with  its  importance  and  power  as  one  of  the  chief  financial 
centres  of  the  world. 

The  agitation,  which  had  been  intermittent  but  ever  alive  for  a 
decade  or  more  of  years,  finally  took  definite  shape  in  1898,  when  the 
first  active  steps  were  taken  toward  the  consummation  of  the  idea  of 
a  new  Stock  Exchange.  In  that  year,  shortly  after  the  election  of  Mr. 
Rudolph  Keppler  as  president  of  the  Board,  a  committee  was  appointed, 
known  as  the  Committee  on  Plan  and  Scope,  consisting  of  Messrs. 
Rudolph  Keppler,  J.  W.  Davis,  R.  H.  Thomas,  W.  B.  Dickerman  and 
Wm.  H.  Granbery,  and  to  this  committee  was  entrusted  the  responsi¬ 
bility  of  all  the  necessary  preliminaries  in  the  matter  of  formulating  a 
general  scheme  of  operation.  On  the  suggestion  of  Mr.  J.  W.  Davis, 
negotiations  were  successfully  carried  through  for  the  purchase  of  the 
Western  Union  Telegraph  Company’s  property,  16  and  18  Broad  Street, 
adjoining  the  old  Stock  Exchange  on  the  south,  giving  an  additional 
frontage  of  fifty  feet ;  and  this  was  followed  by  the  purchase,  in  Febru¬ 
ary,  1899,  of  the  narrow  strip  on  the  north  side,  known  as  the  Swan 
property. 


412 


THE  NEW  YORK  STOCK  EXCHANGE 


When  the  building  project  had  been  decided  upon  in  a  general  way,  it 
was  agreed  to  invite  competitive  plans  from  the  leading  architects  of 
the  city,  each  competitor  to  submit  two  alternate  designs.  Eight  promi¬ 
nent  architects  participated  in  this  competition.  It  was  decided  that 
the  competitor  submitting  the  plan  that  should  be  adopted  wras  to  be 
engaged  as  the  architect  of  the  building.  After  studious  consideration 
of  all  the  plans  submitted,  Mr.  George  B.  Post,  the  designer  of  many 
of  the  most  conspicuous  office  buildings  in  the  city,  was  named  as  the 
successful  competitor,  and  commissioned  with  the  important  work  of  super¬ 
vising  the  construction  of  the  new  Exchange. 

At  this  stage  of  progress  the  Committee  on  Plan  and  Scope  was 
discharged  and  a  new  committee,  known  as  the  Building  Committee, 
was  appointed,  as  follows:  Ransom  H.  Thomas,  chairman;  Rudolph 
Keppler,  J.  T.  Atterbury,  R.  P.  Doremus,  Ernest  Groesbeck  and  H.  G.  S. 
Noble.  And  to  the  constant  and  devoted  personal  labors  of  Chairman 
Thomas  and  his  fellow  members  of  the  committee  the  main  credit  is  due 
for  the  successful  and  thorough  manner  in  which  the  great  undertaking 
was  pushed  to  completion. 

The  contract  for  the  construction  of  the  building  was  awarded  to 
Mr.  Charles  T.  Wills,  and  on  April  29,  1901,  the  last  board -room 
session  was  held  in  the  old  building,  the  business  of  the  Exchange  being 
transferred  to  the  Produce  Exchange  on  Beaver  Street  as  temporary 
headquarters.  The  actual  work  for  the  construction  of  the  new  Exchange 
was  begun  on  May  1,  by  tearing  down  the  old  building. 

It  had  been  expected  that  the  new  building  wrould  be  completed  in  one 
year,  but  owing  to  unforeseen  circumstances  it  was  within  a  few  days 
of  two  years  before  the  edifice  was  ready  for  occupancy  and  business 
was  resumed  in  the  new  quarters.  Among  the  causes  to  which  the 
delay  was  attributed  were  the  labor  situation,  the  rush  of  work  in 
every  quarry,  mill  and  shop  in  the  country,  the  changes  and  additions 
made  as  the  work  progressed  and  as  they  suggested  themselves  to  the 
Building  Committee,  and  the  problem  of  removing  the  old  building  and 
vaults.  That  portion  of  the  old  building  beneath  the  surface  of  the 
ground  had  been  laid  in  cement,  and  the  work  of  demolition  was 
much  more  difficult  than  had  been  anticipated,  and  was  the  cause  of 
a  considerable  loss  of  time  in  making  ready  for  the  actual  labor  of 
preparing  the  foundations  for  the  new  structure.  Blasting  was  resorted 
to,  which,  in  view  of  the  close  proximity  of  other  buildings,  was  a 
hazardous  and  delicate  undertaking.  The  old  safe  deposit  vault  was 
kept  intact  during  all  these  operations,  and  was  in  daily  use  until  the 
new  vault,  constructed  beneath  it,  was  ready  for  use,  when  the  valuable 
securities,  owned  by  a  thousand  different  depositors,  were  transferred 


THE  NEW  STOCK  EXCHANGE 


413 


without  a  single  mishap.  The  old  vault  was  then  blasted  away  and 
the  work  of  construction  and  equipment,  above  and  below  ground,  was 
vigorously  prosecuted  to  completion,  and  on  Wednesday,  April  22,  1903, 
the  brokers  moved  into  their  new  home  on  the  old  site,  and  took 
possession  with  an  imposing  dedicatory  celebration  and  under  the  most 
favorable  auspices. 

That  was  a  red-letter  day  in  the  financial  district.  Flags  and  bunting 
were  lavishly  displayed  from  brokerage  houses,  banks  and  other  office 
buildings,  and  the  streets  were  thronged  with  sightseers.  The  formal 
ceremonies  were  held  in  the  Exchange’s  great  board -room,  which  had 
been  elaborately  decorated  with  flags  and  evergreens  and  filled  with 
hundreds  of  chairs  for  the  accommodation  of  invited  guests.  The  officers 
of  the  Exchange  and  distinguished  guests  occupied  a  large  platform  along 
the  "Wall  Street  side  of  the  room,  and  the  Seventh  Regiment  Band  was 
stationed  on  a  similar  platform  on  the  opposite  side  and  discoursed 
appropriate  music  during  the  exercises. 

Among  the  guests  were  financiers  of  national  and  international 
reputation. 

The  exercises  opened  with  a  brief  address  of  welcome  by  Mr.  Rudolph 
Keppler,  president  of  the  Exchange,  after  which  the  Rev.  Dr.  Morgan 
Dix,  of  Trinity  Church,  offered  prayer,  the  audience  standing.  The 
invocation  concluded  with  these  words:  “The  silver  is  Thine  and  the 
Gold  is  Thine,  0  Lord  of  Hosts.  May  they  who  occupy  this  house  and 
do  business  within  it  be  true  and  just,  providing  things  honest  in  the 
sight  of  men  and  in  Thy  sight.  Defend  Thy  people.  Make  secure  to  us 
our  place  among  the  powers  of  the  world,  and  maintain  the  rights  and 
liberties  of  the  land.  Amen.” 

The  Chairman  of  the  Building  Committee,  Mr.  Ransom  H.  Thomas, 
was  then  introduced,  and  in  a  brief  address,  on  behalf  of  the  Building 
Committee,  handed  the  completed  structure  over  to  the  New  York  Stock 
Exchange  Building  Company. 

President  Donald  Mackay,  of  the  Building  Company,  formally  accepted 
the  building  from  the  chairman  of  the  Building  Committee,  on  behalf  of 
the  Building  Company,  and  in  turn  passed  it  over  to  President  Keppler,  of 
the  Stock  Exchange,  and  through  him  to  the  members  of  the  Exchange. 

An  address  by  President  Keppler  followed,  in  which  the  speaker 
contrasted  the  Stock  Exchange  organization  of  the  days  of  the  button- 
wood  tree,  in  1792,  with  the  present  institution  in  its  palatial  new 
home,  which,  as  he  characterized  it,  “is  but  one  of  the  many  astounding 
changes  that  typify  our  onwrard  march  toward  supremacy  and  give 
lasting  and  monumental  expression  to  the  unexampled  progress  and 
prosperity  with  which  our  beloved  country  has  been  blessed.”  He 


414 


THE  NEW  YORK  STOCK  EXCHANGE 


reviewed  the  work  of  creating  the  edifice,  from  its  inception  to  its  comple¬ 
tion,  paying  eloquent  tribute  to  the  committees  and  responsible  masters 
in  the  planning,  construction,  equipment,  and  decoration,  including  George 
B.  Post,  the  architect;  J.  Q.  A.  Ward,  the  sculptor;  Charles  T.  Wills,  the 
builder;  Elmer  E.  Garnsey,  the  decorative  artist;  John  F.  O’Rourke,  the 
constructing  engineer,  and  Albert  R.  Wolff,  the  ventilating  engineer.  His 
concluding  words  were:  “Let  us  always  remember  the  objects  of  our 
association  as  laid  down  in  the  very  first  article  of  our  constitution, 
namely,  ‘to  maintain  high  standards  of  commercial  honor  among  our 
members,  and  to  promote  and  inculcate  just  and  equitable  principles  of 
trade  and  business.’  Living  and  acting  by  this  standard,  we  shall  have 
performed  our  duty  to  ourselves  and  to  the  public,  whose  respect  and 
confidence  we  cherish  and  enjoy.  Honor  and  integrity  are  the  watchwords 
inscribed  on  our  escutcheon  which  has  passed  down  from  generation  to 
generation  and  which  shall  ever  remain  unstained  so  long  as  we  proudly 
lay  claim  to  the  name  and  title  of  the  New  York  Stock  Exchange.” 

Seth  Low,  Mayor  of  New  York,  made  a  brief  speech,  congratulating 
the  members  on  behalf  of  the  city,  upon  the  completion  of  the  building 
and  their  entrance  into  it,  and  gave  expression  to  a  prophecy  and  a 
hope:  “Out  of  your  great  past  will  come  a  greater  future.  It  is  my  hope 
that  you  will  contribute  to  the  development  of  the  city  in  a  manner 
worthy  of  your  home  and  of  the  great  city  in  which  you  are.” 

A  paper  read  by  President  Keppler,  and  written  by  William  Alexander 
Smith,  the  oldest  living  member  of  the  Stock  Exchange,  who  joined  in 
1844,  was  of  a  reminiscential  and  congratulatory  character,  and  the 
venerable  writer,  who  was  present  on  the  platform,  was  given  three 
enthusiastic  cheers  by  the  entire  assemblage. 

At  the  conclusion  of  the  formal  ceremonies  a  general  invitation  was 
extended  by  President  Keppler  to  all  present,  to  inspect  the  building  through¬ 
out,  and  an  informal  reception  was  held  in  every  room  in  the  edifice, 
which  was  decorated  profusely  with  flowers  and  potted  plants  in  every 
department.  During  the  day  nearly  20,000  persons  visited  the  building. 

From  an  architectural  standpoint  the  new  Stock  Exchange  is  one  of 
the  most  impressive  and  beautiful  structures  in  the  city,  and  a  conspicuous 
feature  even  in  that  section  of  the  city  which  is  distinguished  for  its 
majestic  and  imposing  buildings.  When  the  difficulty  that  presented  itself 
at  the  outset,  in  the  irregular  shape  of  the  plot  of  ground  to  be  occupied, 
is  taken  into  consideration,  the  perfect  manner  in  which  the  completed 
structure,  in  conception  and  design,  was  made  to  solve  the  problem, 
filling  every  inch  of  the  space  and  presenting  a  symmetrical  and  classical 
appearance,  marks  the  achievement  as  a  triumph  of  architectural  skill. 

The  building  fronts  on  Broad,  Wall  and  New  Streets;  the  Broad 


PEDIMENT  OF  THE  NEW  YORK  STOCK  EXCHANGE,  WITH  STATUARY  BY  J.Q.A.WARD. 


THE  NEW  STOCK  EXCHANGE 


415 


Street  frontage  being  137  feet  8%  inches ;  Wall  street  frontage,  14  feet  8 
inches,  and  New  Street,  152  feet  10  inches.  The  plot  was  so  shaped  that 
the  largest  rectangular  quadrangle  that  could  be  laid  out  thereon  was 
109x144  feet,  which  is  the  size  of  the  main  floor  or  board-room. 

The  building  is  constructed  of  white  marble  of  superior  quality, 
durability  and  appearance,  brought  from  Georgia ;  and  its  real  front,  on 
Broad  Street,  is  its  most  striking  exterior  feature.  The  architecture  is 
of  the  Roman  renaissance  type,  and  the  main  feature  of  the  exquisitely 
sculptured  facade  is  the  colonnade,  of  six  fluted  Corinthian  columns  of 
stupendous  size,  between  two  enormous  pilasters  supporting  the  pedi¬ 
ment,  which  contains  an  already  celebrated  group  of  white  marble 
statuary  by  the  eminent  American  sculptor,  J.  Q.  A.  Ward.  The  group 
numbers  eleven  figures,  of  heroic  size,  typifying  American  commerce  and 
industry,  the  official  description  of  which  is  as  follows : 

“The  central  figure  symbolizes  ‘Integrity’ — the  just  government  of 
financial  transactions. 

“  On  the  sides  are  the  ‘Wealth  Producing  Sources’— the  products  of  the 
earth  and  the  means  of  invention. 

“  The  first  group  on  the  left  represents  ‘  Primitive  Agriculture  and  the 
Products  of  the  Soil ;  ’  the  second  group,  ‘  Mining.’ 

“On  the  right,  etc.,  ‘Scientific  and  Mechanical  Appliances,  Motive 
Power,’  etc.,  and  the  extreme  group,  ‘The  Designer  and  the  Mechanic.’ 

“The  wave-work  indicated  on  the  extreme  ends  of  the  pediment  is 
intended  to  show  the  influence  from  ocean  to  ocean  of  the  Stock  Exchange. 

“At  the  feet  of  the  central  figure,  ‘Integrity,’ are  two  small  figures, 
receiving  and  noting  the  various  products  brought  by  the  other  groups.” 

The  facade  is  topped  by  a  balustrade  156  feet  above  the  sidewalk. 
From  the  base  of  the  columns,  which  begin  at  a  height  corresponding  to 
the  second  story,  to  the  top,  which  is  on  a  level  with  the  ceiling  of  the 
board-room,  the  entire  front  of  the  building  is  of  glass,  making  practically 
one  stupendous  window,  96  feet  long  and  50  feet  high.  Another  window  of 
the  same  dimensions  forms  the  New  Street  front,  thus  giving  the  room 
virtually  front  and  rear  walls  entirely  of  glass,  which,  with  a  skylight  30  feet 
square  in  the  centre  of  the  ceiling,  72  feet  above  the  floor,  insure  an  abund¬ 
ance  of  light  in  every  part  of  the  imposing  room,  regardless  of  the  weather 
conditions.  These  great  windows  weigh  thirteen  tons  each,  and  are  capable 
of  withstanding  a  wind  pressure  of  75  tons.  Each  window  is  supported  by 
vertical  18-inch  steel  beams  enclosed  in  ornamental  bronze  casings. 

A  notable  feature  of  the  classical  Broad  Street  front  is  the  manner  in 
which  the  architect  has  made  the  facade  to  stand  out,  as  a  detached  and 
individual  construction,  from  the  adjoining  skyscrapers  on  either  side,  by 
apparently  contracting  the  width  and  leaving  an  “appendage”  on  the 
outer  side  of  each  pilaster,  to  serve  as  a  background,  or  relief  for  the  facade 


416 


THE  NEW  YORK  STOCK  EXCHANGE 


itself.  The  appendage  to  the  left  of  the  facade  contains  the  entrance  to  the 
visitors’  gallery,  committee  rooms,  offices,  etc. 

Beneath  the  base  of  the  colonnade  seven  large  windows  open  out  upon 
seven  small  ornamental  balconies  which  project  over  the  main  entrances  to 
the  building.  These  balconies  are  on  a  level  with  the  board-room  floor, 
below  which  are  the  main  lobby,  telegraph  offices,  etc.,  on  the  ground  floor, 
and  underneath  the  street  level  are  the  vaults  and  machinery  plants. 

The  board  room  is  decorated  in  white  and  gold.  Its  massive  ceiling  is 
supported  by  four  steel  trusses  115  feet  long  and  15  feet  deep,  which  are 
heavily  moulded  with  gilt  ornamentation,  and  upon  which  rests  the  entire 
weight  of  the  upper  portion  of  the  building,  a  total  of  about  5,000  tons. 
The  walls,  of  pure  white  marble,  are  paneled  with  heavy  moulding;  the 
interior  panels  being  of  bluish  brownstone,  and  the  metopes  in  the  entabla¬ 
ture  of  pink  marble.  The  president’s  rostrum  is  on  the  north  side  and 
entered  from  the  second  floor  level  over  the  Wall  Street  entrance.  Above 
it,  and  in  duplicate  on  the  south  side,  are  the  annunciator  boards,  covering 
a  total  surface  of  800  square  feet,  and  containing  the  respective  numbers  of 
the  brokers,  which  are  flashed  into  sight  automatically,  when  the  brokers 
are  wanted  at  their  telephones,  by  means  of  electric  push  buttons  in  the 
corresponding  telephone  booths  on  the  New  Street  side.  In  the  operation 
of  these  annunciator  signals  8,000  separate  wires  are  employed,  with  a 
total  length  of  over  1,300,000  feet.  The  visitors’  gallery  is  on  the  Broad 
Street  side,  admission  to  which  is  by  ticket  only,  issued  by  members  of  the 
Exchange.  On  the  New  Street  side  is  another  gallery,  situated  over  the 
telephone  booths,  where  members  may  smoke. 

Above  the  board  room,  on  the  Wall  Street  side,  on  the  sixth  floor,  is 
the  governors’  and  bond  room ;  on  the  New  Street  side,  the  president’s 
room,  the  secretary’s  room  and  a  number  of  committee  rooms  and  offices. 
On  the  seventh  floor,  New  Street  side,  is  the  Luncheon  Club’s  suite,  with 
dining-rooms  for  smokers  and  non-smokers,  lounging  rooms  and  other 
apartments.  Above  these  is  the  club’s  kitchen,  with  a  mezzanine  serving 
gallery.  The  main  dining-room  of  the  club  is  76  feet  long,  40  feet  wide  and 
18  feet  high,  and  is  finished  in  mahogany.  All  these  upper  apartments  are 
richly  decorated  and  luxuriously  furnished,  and  equipped  with  all  the 
modern  and  scientific  appliances  for  the  comfort  and  convenience  of  the 
occupants.  A  notable  feature  on  the  fourth  floor  is  the  emergency  hospital, 
where  a  physician  is  constantly  in  attendance.  On  the  third  floor  are  the 
bath  rooms,  where  the  various  kinds  of  baths  are  at  the  disposal  of 
members.  On  all  the  floors  the  halls  are  paved  and  wainscoted  with 
marble,  and  the  entire  building  is  as  near  fireproof  as  human  ingenuity 
can  make  it. 

Beneath  the  ground  level  the  structure  is  hardly  less  interesting  than 


THE  NEW  STOCK  EXCHANGE 


417 


the  superstructure  as  an  achievement  in  scientific  construction.  The  lowest 
floor  is  42  feet  below  the  surface  of  Broad  Street,  and  in  the  descent  the 
visitor  passes  the  employes’  cloakrooms  and  lockers,  engine,  dynamo, 
boiler,  switchboard  and  pump  rooms.  At  the  lowest  level  the  sewage 
collects,  and  is  pumped  up  about  eighteen  feet  into  the  city  sewer  pipes* 
A  concrete  caisson  dam  surrounds  the  floor  of  the  cellar,  which  is  so  bonded 
together  as  to  form  a  continuous  wall,  the  bottom  of  which  is  nearly  seven 
feet  below  the  cellar  floor  and  resting  on  solid  rock.  The  floor  of  the  cellar 
protected  by  this  dam  is  36  feet  below  the  ground  water  in  the  soil.  After 
this  dam  was  completed  twenty-seven  interior  caissons  were  sunk  in  the 
soil,  down  to  bed-rock ;  in  them  the  iron  columns  were  erected  and  the 
floors  constructed  from  the  sidewalk  downward,  the  earth  being  excavated 
as  the  floors  were  put  in.  The  steel  safe  deposit  vault  in  the  basement  is 
118  feet  7  inches  long,  21  feet  wide,  9  feet  10  inches  high,  and  the  body 
10  inches  thick.  The  total  weight  is  776  tons.  It  is  carried  on  steel  beams 
and  columns  at  a  height  of  33  feet  4  inches  above  the  cellar  floor,  and  is 
enclosed  by  a  cold  rolled  steel  bar  partition  1%  inches  in  diameter  and  276 
feet  in  length,  weighing  40  tons. 

An  official  statement  of  information  concerning  the  building  gives  the 
number  of  cubic  feet  contained  in  the  board-room  as  1,169,352.  The 
number  of  rivets  used  to  put  together  the  trusses  supporting  the  ceiling  is 
about  48,000.  There  were  6,662,298  bricks  used  for  the  masonry  work, 
13,378  cubic  yards  of  sand  and  17,873  barrels  of  cement.  There  were  also 
114,645  enamelled  bricks  used,  and  55,500  face  brick.  In  the  concrete 
there  were  6,853  cubic  yards  of  broken  stone  used.  The  fireproof  materials 
for  partitions,  floor  arches,  floors,  etc.,  amounted  to  344,784  square  feet. 

In  the  construction  of  the  woodwork  of  the  building,  there  were  399,600 
feet,  board  measure,  of  oak,  mahogany,  cherry,  maple,  pine,  and  other 
woods  used.  To  put  this  together  it  required  150  kegs  of  nails,  and  would 
take  one  man  fifty-nine  years,  working  eight  hours  a  day. 

The  glass  in  the  windows  will  cover  an  area  of  24,225  square  feet,  or 
about  one-half  acre,  requiring  five  tons  of  sash  weights  to  balance  the  glass 
in  the  window  sashes. 

The  weight  of  the  structural  steel  in  the  columns,  beams,  girders,  etc., 
used  for  the  support  of  the  building  is  6,025,636  pounds,  or  about  3,013 
tons.  The  weight  of  the  ornamental  or  light  iron  work  for  stairs,  elevator 
fronts,  railings,  gates,  skylight  wrork,  etc.,  is  about  1,700,000  pounds,  or 
850  tons. 

There  are  four  water-tube  boilers  provided  for  generating  steam  for  all 
purposes,  aggregating  about  800  horsepower.  The  building  is  warmed  by 
direct  radiation,  the  radiators  being  located  underneath  the  windows,  so 
as  to  prevent  down  draught;  265  radiators  and  coils  are  used  for  this 


418 


THE  NEW  YORK  STOCK  EXCHANGE 


purpose.  The  total  amount  of  steam  piping  in  the  building  aggregates 
76,385  lineal  feet,  or  about  14%  miles. 

The  fresh  air  supplied  to  the  building  amounts  to  about  12,000,000 
cubic  feet  an  hour.  In  the  winter  this  air  is  warmed  by  passing  over  steam 
coils  to  a  temperature  slightly  above  that  of  the  room.  In  the  summer,  the 
air  for  the  board-room,  and  rooms  below,  is  cooled  by  the  air  passing  over 
25,000  lineal  feet  of  cold  pipe  from  three  absorption  machines  of  150  tons 
capacity  each.  Moisture  is  extracted  from  the  air  supply  for  the  board- 
room,  amounting  to  about  1,000  pounds  of  water  per  hour  when  the 
external  air  is  85  degrees  F.,  and  the  humidity  85  per  cent.  Besides  the 
fresh-air  supply  there  is  a  powerful  exhaust  provided,  which  exhausts  foul 
air  at  the  rate  of  about  12,000,000  cubic  feet  per  hour. 

The  fresh  air  and  foul  air  is  circulated  by  ten  large  centrifugal  fans 
eight  feet  to  eleven  feet  in  diameter,  driven  by  electric  motors,  requiring  179 
horsepower.  The  total  weight  of  the  ducts  conveying  this  air  is  about 
394,570  pounds,  or  197  tons.  There  is  165,250  square  feet  of  non¬ 
conducting  material  used  for  covering  steam  pipes  and  ducts  to  prevent 
radiation  of  heat. 

The  elevator  installation  consists  of  six  passenger  elevators,  three 
direct  lifts  and  five  electric  dumbwaiters.  The  passenger  elevators  are 
arranged  to  lift  2,500  pounds  at  250  feet  a  minute,  or  1,500  pounds  at 
500  feet  a  minute,  the  safe  lifting  elevators  lifting  6,000  pounds  at  25  feet 
a  minute,  the  highest  lift  being  175  feet. 

The  lifting  cables  are  of  five -eighth  inches  and  three-quarter  inches 
diameter,  and  capable  of  lifting  a  safe  load  of  26,000  and  38,000  pounds, 
respectively,  the  longest  cable  being  500  feet  long.  One  of  the  plungers  for 
the  direct  lift  extends  36  feet  below  the  cellar  floor  in  the  solid  rock.  There 
are  three  main  pumps  and  one  safe-lift  pump  in  the  cellar,  connected  with 
four  pressure  tanks  distributed  throughout  the  building. 

The  total  weight  of  the  elevator  installation  is  about  675,000  pounds, 
or  337%  tons.  The  length  of  cables  used  is  about  21,000  feet,  or  four 
miles.  The  length  of  piping  is  5,400  feet,  or  over  one  mile. 

The  windows  on  each  front,  fifty  feet  high  and  ninety-six  feet  long,  and 
with  the  double  thickness,  will  cover  an  area  of  about  16,100  square  feet, 
weighing  160  tons.  They  are  cleaned  from  swing  scaffolds  hung  from  the 
ceiling.  The  amount  of  cleaning  to  be  done  can  best  be  realized  when  it  is 
known  that  the  glass,  if  it  were  placed  in  ordinary  shop  fronts,  would 
occupy  a  block  7 00  feet  long. 

From  the  board  room  tubes  run  to  all  portions  of  the  building,  offices, 
cable,  and  telegraph  companies,  and  are  so  arranged  that  messages  sent  on 
the  longest  tubes  arrive  at  their  destination  to  the  fraction  of  a  second 
that  a  message  on  the  shortest  line  requires.  There  are  about  six  miles  of 


419 


THE  NE^>STOCK  EXCHANGE 

brass  and  iron  tubing  and  175  automatic  terminals.  The  cooling  plant  is 
used  for  cooling  the  air  of  the  board  room,  for  the  refrigerating  work  of 
the  Luncheon  Club,  and  for  the  ice-water  fountains  throughout  the  build¬ 
ing,  the  cooling  effect  being  equal  to  the  melting  of  450  tons  of  ice  a  day. 
Some  idea  of  the  size  of  the  plant  may  be  had  when  it  is  stated  that  it 
required  fifty  railroad  cars  to  transport  the  machinery,  and  that  the  plant 
will  produce  the  same  cooling  effect  daily  as  17,600  cubic  feet  of  ice,  or  a 
block  forty  feet  square  and  eleven  feet  thick. 

The  electric  lighting  and  power  plants  comprise  three  units,  the  engines 
of  which  require  1,040  horsepower;  the  dynamos  in  connection  with  the 
same  generate  650  kilowatts.  The  number  of  incandescent  lights  through¬ 
out  the  building  is  6,000,  and  of  arc  lights  68,  equal  to  about  256,000 
candles.  The  number  of  motors  for  running  various  machines  is  38. 

The  total  weight  of  the  steel  conduit  for  running  the  electric  light, 
telephone,  call  bells,  and  other  wires,  is  1,144  tons.  The  total  weight  of 
copper  wire  used  is  12  tons.  The  total  length  of  wire  used  is  208  miles. 

The  storage  battery  consists  of  135  cells,  with  a  capacity  of  400  lights 
for  eight  hours,  and  weighs  71,010  pounds.  The  lead  air  ducts  in  connec¬ 
tion  with  the  storage  battery  weigh  30,524  pounds. 

There  are  34  watchman’s  clock  stations  throughout  the  building, 
connected  to  a  central  station  in  the  vault  office.  There  are  two  fire-alarm 
boxes  connected  direct  to  the  Fire  Department. 

There  are  two  annunciators,  as  has  been  shown,  one  on  each  side  of  the 
board  room,  each  having  1,200  numbers,  each  number  occupying  a  space 
of  nine  inches  square.  For  this  work  there  are  8,000  separate  wires,  which 
have  a  total  length  of  1,300,000  feet,  or  247  miles. 

There  are  four  fire  lines  in  the  building,  with  46  outlets  at  different 
parts,  having  a  total  length  of  3,450  feet  of  hose. 

The  cost  of  the  building,  according  to  the  original  estimate,  was  to 
have  been  about  $1,000,000,  but  the  same  series  of  formidable  and  unfore¬ 
seen  difficulties  which  retarded  the  work  of  construction,  as  well  as  many 
important,  extensive  and  expensive  alterations  in  the  original  plans  and 
the  addition  of  many  features  not  at  first  contemplated,  combined  to  make 
the  cost  of  the  structure  greatly  exceed  that  figure;  and,  although  the 
exact  expenditure  is  not  made  public,  it  is  supposed  to  have  been  in  the 
neighborhood  of  $4,000,000 ;  the  policy  of  the  Building  Committee  having 
been,  as  expressed  by  Chairman  Thomas,  to  build  “  on  the  broad  principle 
that  where  so  many  of  our  members  spend  the  active  years  of  their  lives, 
they  are  entitled  to  the  best  that  architectural  ingenuity  and  engineering 
skill  can  produce.”  The  result  of  that  broad  policy  is  shown  in  the  com¬ 
pleteness  and  elegance  of  this,  perhaps  the  most  substantial  and  perfect 
financial  temple  in  the  world. 


. 


■ 


IV 


THE  STOCK  EXCHANGE  CLEARING 

HOUSE 


By 


JOHN  GROSYENOR  WILSON 


IV 

THE  STOCK  EXCHANGE  CLEARING 

HOUSE 


BY 

JOHN  GROSVENOR  WILSON 

HE  Stock  Exchange  Clearing  House,  which  has  been  in 
operation  since  1892,  has  proved  to  be  an  invaluable 
adjunct  in  the  transaction  of  business;  indeed,  expert 
opinion  is  that,  without  this  institution,  the  great  volume 
of  trading  developed  in  the  last  three  or  four  years 
would  have  been  physically  impossible — the  old  machinery 
would  have  broken  down  of  its  own  weight.  To  appreciate  this  fact  a 
glance  at  the  old  methods  is  necessary.  Prior  to  the  Clearing  House  all 
securities  sold  in  the  regular  way  were  compelled  to  be  actually  (physically) 
delivered  at  sometime  the  succeeding  day  before  2:15  p.  m.  Immense 
values  in  stocks,  bonds  and  checks  were  thus  entrusted  to  an  army  of 
messenger  boys  scurrying  through  the  streets  from  office  to  office.  It  is 
little  less  than  miraculous  that  so  few  losses  occurred,  but  the  liability 
to  great  loss  was  the  ever  present  cause  of  anxiety.  The  absurdity 
of  the  old  system  was  visibly  apparent  in  respect  to  deliveries  of  gold, 
especially  before  gold  certificates  were  issued.  Men  and  youths  with  bags 
containing  $5,000  and  $10,000  of  gold  upon  their  shoulders  collided  with 
pedestrians  throughout  the  Wall  Street  district.  That  there  were  rela¬ 
tively  few  losses,  through  carelessness  or  robbery,  was  due  not  only  to  the 
police,  but  naturally  attributed  also  to  the  fact  that  criminals  of  the 
higher  class  were  themselves  speculating  and  were  temporarily  above 
plunder  by  violence.  Finally  the  New  York  City  Gold  Exchange  Bank  was 
established  as  a  clearing  house  for  gold,  but  upon  a  very  defective  basis  in 
the  light  of  modern  methods.  Brokers  were  required  to  actually  deliver 
gold  or  currency  at  the  Clearing  House,  in  whose  possession  their  property 
remained  until  the  Clearing  House  accounts  had  been  tallied,  and  the 


424 


THE  NEW  YORK  STOCK  EXCHANGE 


actual  amounts,  payable  or  receivable,  by  the  various  brokers  had  been 
ascertained.  It  will  be  readily  seen  that  through  pressure  of  business  or 
errors  in  book-keeping  dangerous  delays  might  ensue;  and  this,  indeed, 
was  the  case  on  historic  Black  Friday,  September  24, 1869.  The  congested 
condition  of  the  Clearing  Bank  was  a  contributing  cause  to  the  panic  of 
that  day.  This  institution,  however,  ceased  to  exist  upon  the  resumption 
of  specie  payment,  when  speculation  in  gold  terminated,  and  from  that 
time  until  1892  the  Stock  Exchange  held  exclusively  to  actual  daily 
deliveries. 

The  old  system  was  responsible  for  much  wasteful  expense  and  unneces¬ 
sary  labor.  Many  more  clerks  and  book-keepers  were  required.  There 
was  constant  difficulty  as  to  delivery  on  time;  that  is,  before  2:15  p.  m. 
Sometimes  fifty  or  more  boys  would  be  collected  by  a  single  large  house 
before  10  a.  m.,  on  occasions  when  big  deliveries  had  to  be  made  of  the 
previous  day’s  sales.  As  2  o’clock  approached,  the  streets  of  the  financial 
district  presented  a  curious  spectacle.  By  common  consent  the  delivery 
boys  were  given  the  right  of  way.  Running  at  top  speed,  their  hands  full 
of  securities  and  checks,  the  boys  were  everywhere  in  evidence.  Between 
2  and  2:15  p.  m.  the  large  offices  became  blocked  with  long  queues  standing 
at  cashiers’  windows  with  sales  tickets  and  deliveries.  Every  day  in  busy 
times,  “Past  delivery  hours — too  late!”  was  heard  in  almost  every  office, 
and  many  brokers  were  forced  to  carry  undelivered  stocks  overnight  and 
borrow  money  upon  them.  But  the  most  serious  matter  of  all  was  the 
compulsory  over-certification  by  the  banks  of  brokers’  and  bankers’ 
checks — a  practice  technically  illegal ;  the  abuse  of  which,  in  fact,  was  very 
recently  punished  in  criminal  proceedings  against  the  president  of  the 
Seventh  National  Bank.  The  actual  loss  to  banks  through  over-certifica¬ 
tion  has,  however,  been  remarkably  small.  While  there  have  been  cases  of 
dishonorable  brokers  intentionally  “going  back”  on  their  banks,  the 
innumerable  and  continuous  examples  of  brokers,  although  perfectly 
solvent,  being  unable  to  make  their  accounts  good  overnight,  and  of  the 
banks  being  subjected  to  “forced  loans”  in  consequence,  and  of  the  prompt 
settlement  by  the  brokers  the  next  day,  speak  highly  for  the  average  good 
faith  and  probity  of  Wall  Street.  Speaking  of  this  practice  of  over-certifi¬ 
cation,  Mr.  John  R.  Dos  Passos,  author  of  “A  Treatise  on  the  Law  of 
Stock  Brokers  and  Stock  Exchanges,”  said  in  an  interview  published  in  the 
Evening  Post,  February  21, 1903 : 

“When  a  law  comes  in  conflict  with  a  commercial  necessity,  the  former 
must  go  to  the  ground.  Law,  to  be  effective,  must  be  in  sympathy  with 
the  present  thoughts  and  customs  of  the  people,  and  when,  instead  of 
following,  it  defies  them,  it  cannot  be  successfully  administered.  It  becomes 
a  dead  letter  or  it  is  evaded.” 

These  statements  of  Mr.  Dos  Passos  are  simply  unanswerable.  The 
Clearing  House,  as  will  be  seen  later  on,  vastly  reduces  the  required  certifi- 


THE  STOCK  EXCHANGE  CLEARING  HOUSE 


425 


cation,  which  in  great  markets  would  otherwise  rise  to  incomprehensible 
figures.  For  example,  it  is  estimated  that  had  there  been  no  Clearing  House, 
the  transactions  of  1898-99  would  have  required  the  certification  of  checks 
calling  for  $9,537,000,000 — figures  which  the  human  mind  cannot  grasp. 

One  would  suppose  that  the  common  sense  and  progressive  instinct  of 
the  then  second  largest  money  centre  of  the  world  would  have  resulted  in 
the  adoption  of  some  system  of  squaring  obligations  that,  years  before 
the  formation  of  the  Clearing  House,  would  have  alleviated  the  dangers 
and  burdens  described.  The  delay  must  be  charged  to  the  conservatism  of 
the  Street,  the  characteristic  lack  of  leisure  to  consider  methods,  and  the 
difficulty  of  changing  traditional  ways  to  which  the  whole  banking  com¬ 
munity  was  accustomed.  Brokers  who  were  familiar  with  the  old  Gold 
Exchange  Bank,  heretofore  described,  shuddered  at  the  very  idea.  Others 
dreaded  the  publicity  that  they  thought  wyould  be  given  to  their  transac¬ 
tions  by  submitting  their  reports  to  Clearing  House  clerks.  This  fear  has 
proved  to  be  groundless;  the  broker  does  not  reveal  the  name  of  his 
customer  to  the  Clearing  House,  which  is  only  cognizant  of  the  totality  of 
his  transactions.  Objections  were  also  raised  on  legal  grounds,  the  theory 
being  that,  as  the  State  law  demands  “an  intent  to  deliver,”  transactions 
merely  cancelled  on  a  balance  sheet  might  be  illegal.  The  courts,  however, 
have  steadily  held  that  contracts  where  actual  delivery  is  enforceable 
comply  with  the  statute.  The  Stock  Exchange  has  the  right  to  regulate 
its  methods  of  delivery. 

Several  attempts  were  made  to  institute  a  Clearing  House,  without 
success,  until  a  report  from  a  committee,  of  which  Francis  L.  Eames  was 
chairman,  was  submitted  in  March,  1892,  proposing  the  present  system. 
Out  of  the  eleven  hundred  members  entitled  to  vote,  two  hundred  and 
forty-four  cast  their  ballots  against  it,  showing  how  strong  was  still  the 
feeling  of  opposition.  The  voting  ended  April  20, 1892,  and  the  plan  was 
adopted  by  a  good  majority,  and  put  into  formal  operation  May  16, 1892. 

The  theory  of  a  clearing  house  is  solely  the  simplification  of  exchanges. 
Bank  clearing  houses  are  common  all  the  world  over  and  need  no  descrip¬ 
tion.  Stock  clearing  houses  work  upon  identical  principles.  For  example, 
if  A  buys  one  thousand  shares  of  a  given  stock  of  B,  and  if  A  the  same  day 
sells  the  thousand  shares  to  C,  it  is  plain  that  the  delivery  from  B  to  C  of  a 
thousand  shares  would  “even”  the  three  transactions,  A’s  transactions 
being  balanced  as  to  quantity  of  stock,  though  not  as  to  values — he  may 
owe  a  balance  or  may  be  entitled  to  receive  a  balance.  This  is  exactly 
what  the  Clearing  House  does  for  A,  B,  and  C.  All  active  stocks  are  listed 
in  the  Clearing  House,  and  before  4:15  p.  m.  on  full  business  days,  and 
before  1:15  p.  m.  on  the  Saturday  half-holiday,  every  seller  sends  to  the 
office  of  the  buyer  a  “deliver  ticket,”  and  receives  by  his  messenger  a 
“receive  ticket”  in  return,  This  exchange  of  tickets  is  for  purposes  of 


426 


THE  NEW  YORK  STOCK  EXCHANGE 


comparison,  and  they,  in  turn,  are  sent  to  the  Clearing  House  with  the 
brokers’  sheets.  These  sheets  must  be  delivered  at  the  Clearing  House 
before  7  p.  m.  on  Mondays,  Tuesdays,  Wednesdays,  and  Thursdays,  and 
before  4  p.  m.  on  Saturdays.  As  there  is  no  formal  clearing  on  Saturday, 
the  brokers  merely  exchange  tickets  on  Friday  afternoon,  and  Friday’s 
transactions,  with  Saturday’s,  are  cleared  on  Monday.  A  broker’s 
“Clearing  House  sheet”  is  the  record  of  all  his  trades  in  Clearing  House 
stocks  for  the  day  (and  matured  contracts),  entered  in  “receive”  and 
“deliver”  columns.  Transactions  in  each  particular  security  are  grouped 
together.  The  sum  total  of  purchases  and  sales  having  been  found,  the 
balance  is  struck.  If  the  result  shows  a  debit,  the  difference  is  denominated 
“balance  check”;  and  the  sheet  must  be  accompanied  by  a  check  for  the 
balance  on  a  Clearing  House  Association  bank  near  Wall  Street,  drawn  to 
the  order  of  the  Stock  Exchange  Clearing  House’s  own  bank.  If  the  result 
shows  a  credit,  the  sheet  must  be  accompanied  by  a  draft  on  the  Clearing 
House’s  own  bank  for  the  sum  indicated.  It  thus  becomes  a  simple  matter 
when  the  broker’s  transactions  are  “even”  for  the  day;  that  is,  when  he 
has  bought  and  sold  an  equal  amount  of  stock.  Herewith  is  a  copy  of  a 
sheet  showing  an  “even”  account: 1 


Receive  from 

Pr. 

Amount. 

Deliver  to 

Pr. 

Amount. 

A.  B.  C . 

100 

St.  Paul.... 

80% 

$  8,050 

A.  Bros . 

600 

St.  Paul.... 

.  79 

$47,400 

D.  &  Bros.. 

500 

a 

80% 

40,125 

A.  &  Co . 

300 

Lk.  Shore.. 

134 

40,200 

A.  Bros . 

100 

Lk.  Shore.. 

135 

13,500 

C.  &  Son . 

100 

New  Eng... 

47% 

4,750 

B.  C.  &Co. 

200 

a 

135% 

27,100 

K.N.  &  Co. 

100 

New  Eng.. 

48 

4,800 

Bal.  Check... 

1,225 

$93,575 

$93,575 

Under  the  old  system  of  actual  deliveries,  the  broker  would  have  issued 
five  checks  and  received  three,  and  $185,925  would  have  been  handled  by 
sundry  banks.  Under  the  Clearing  House  system  a  single  check  for  $1,225 
settles  all  the  trades. 


In  the  case  where  the  transactions  are  not  “even,”  the  same  principle 
applies.  Herewith  is  the  copy  of  a  sheet  showing  an  “  odd  ”  account : 


Receive  from 

Pr. 

Amount. 

Deliver  to 

Pr. 

Amount. 

A.  B.  C . 

900 

St.  Paul.. 

80 

$  72,000 

B.  &  Bro . 

500 

St.  Paul.. 

80% 

$  40,250 

M.  &L . 

100 

(( 

80% 

8,075 

G.  &  Son . 

1000 

No.  West. 

118 

118,000 

I).  E.  &  F.... 

1000 

No.  West. 

119 

119,000 

M.  &  0 . 

400 

Mo.  Pac.. 

59 

23,600 

S.  Bros . 

1000 

New  Eng. 

48 

48,000 

T.  &  W . 

200 

Mo.  Pac.. 

58 

11,600 

Bal.  Deliver. 

Bal.  Receive 

Delivery  Pr. 

200 

Mo.  Pac.. 

57 

11,400 

Delivery  Pr.. 

500 

St.  Paul.. 

80 

40,000 

Bal.  Draft.... 

775 

ft 

1000 

New  Eng. 

49 

49,000 

$270,850 

$270,850 

1  These  sample  sheets  are  taken  from  “Stock  Exchange  Clearing  Houses,”  by  Alexander  D.  Noyes, 
Political  Science  Quarterly,  June,  1893. 


THE  STOCK  EXCHANGE  CLEARING  HOUSE 


427 


It  will  be  seen  that  in  this  case  the  broker  has  bought  500  more  shares 
of  St.  Paul  than  he  has  sold ;  that  he  has  bought  1,000  shares  of  New 
England,  of  which  he  has  sold  none,  and  that  he  has  sold  400  shares  of 
Missouri  Pacific,  of  which  he  has  bought  only  200.  He  has,  therefore,  to 
receive  balances  of  500  St.  Paul  and  1,000  New  England,  and  to  deliver  a 
balance  of  200  Missouri  Pacific.  A  cash  balance  is  due  him  of  $775.  He 
is  instructed  by  the  Clearing  House  to  whom  to  deliver  balances  of  stocks 
due,  and  from  whom  he  will  receive  balances  of  stocks  due  him.  In  other 
words,  the  Clearing  House  evens  up  the  total  transactions  of  the  day,  and 
as  it  is  plain  that  for  every  buyer  there  must  be  a  seller,  the  total  transac¬ 
tions  on  either  side  (buying  and  selling)  must  always  be  exactly  even. 
Another  point  to  notice  is  that  the  Clearing  House  fixes  each  day  an 
arbitrary  price  for  the  settlement  of  each  stock.  This  price  is  always 
named  at  an  even  figure  near  the  closing  quotation,  as  will  be  seen  in  the 
copied  sheet,  where  the  settlement  price  of  Missouri  Pacific  is  made  57, 
St.  Paul  80,  and  New  England  49 — not  the  prices  at  which  they  were 
traded  in.  This,  of  course,  regulates  itself  in  the  settlement,  as  the 
difference  between  the  Clearing  House  price  and  the  price  traded  in  increases 
or  diminishes  the  Clearing  House  draft  where  a  balance  is  due  from  it,  or 
the  broker’s  check  where  a  balance  is  due  from  him.  Bearing  these  points 
in  mind,  and  studying  the  two  sheets  submitted,  a  complete  understanding 
of  the  Clearing  House  system  can  be  arrived  at.  At  first  sight,  to  an 
outsider,  it  seems  a  complicated  and  technical  matter,  but  in  reality  it  is 
very  simple  and  easy  to  grasp. 

The  magnitude  of  Clearing  House  transactions  has  at  times  reached 
enormous  proportions.  The  largest  single  day  was  May  10, 1901,  the  day 
after  the  great  panic.  The  figures  for  that  day,  especially  prepared  for 
this  history,  are  herewith  given : 


CLEARING  HOUSE  OF  THE  NEW  YORK  STOCK  EXCHANGE 

Largest  Single  Day 


1901. 

Number  of 
Shares. 

Value. 

Share  Balance. 

Value  of 
Balance. 

Cash  Balance. 

Number  of 
Sheets. 

May  10 

12,131,600 

$961,300,000 

1,714,800 

$129,800,000 

$5,461,700 

452 

Certification 

obviated . 

221,050,000 

which  is . 

63  $ 

Largest  Double  Day  (Friday’s  and  Saturday’s  Contracts 


1901. 

Number  of 
Shares. 

Value. 

Share  Balance. 

Value  of 
Balance. 

Cash  Balance. 

Number  of 
Sheets. 

May  6 

13,313,800 

$1,132,200,000 

1,526,300 

$140,000,000 

$2,412,000 

447 

Certification 

obviated . 

286,100,000 

which  is . 

67$ 

428 


THE  NEW  YORK  STOCK  EXCHANGE 


Largest  Month  (April,  1901) 


Number  of 
Shares. 

Value. 

Share  Balance. 

Value  of 
Balance. 

Cash  Balance. 

Number  of 
Sheets. 

151,737,600 

$14,032,800,000 

21,030,300 

$1,880,900,000 

$22,014,100 

433  av. 

Certification 

obviated . 

3,254,600,000 

which  is . 

63$ 

Largest  Year  (1901) 


Number  of 
Shares. 

Value. 

Share  Balance. 

Value  of 
Balance. 

Cash  Balance. 

Number  of 
Sheets. 

926,347,300 

$77,853,500,000 

134,390,000 

$10,930,853,600 

$116,849,300 

Certification 

obviated . 

17,065,042,800 

which  is . 

61$ 

The  proportion  of  shares  delivered  on  Clearing  House  allotments  (stock 
balances)  to  total  deliveries  is  about  forty  per  cent.,  and  the  saving  of 
certification  is  consequently  about  sixty  per  cent. ;  but  the  reduction  of 
certification  is  larger  in  proportion  as  the  volume  of  business  increases, 
and  the  proportionate  number  of  checks  drawn  now,  in  payment  for  all 
Clearing  House  balances  (including  stocks  and  cash),  is  about  ten  per  cent, 
of  the  number  which  would  have  been  necessary  under  the  old  system 
(ex-Clearing  House)  in  the  same  stocks.  A  sheet  has  been  cleared  with 
over  20,000  shares  of  stock  on  each  side,  with  a  cash  valuation  of  over 
$2,000,000  on  each  side,  which  was  settled  by  the  payment  to  the  Clearing 
House  of  a  check  for  $62.50,  there  being  no  stock  balances.  There  have 
been  several  sheets  with  about  200,000  shares  on  each  side — some  over 
that  amount  and  others  approximating  it — and  the  cash  value  on  one 
side  of  the  sheet  has  exceeded  $22,000,000. 

The  smoothness  and  accuracy  with  which  this  great  institution  works 
reflect  the  highest  credit  upon  its  organizers  and  their  successors. 

The  Clearing  House  occupies  commodious  offices  at  Nos.  45  and  47  New 
Street,  the  building  running  through  to  Nos.  44  and  46  Broadway.  Its 
clerical  force  consists  of  two  managers  and  one  hundred  and  seventeen 
clerks.  The  entire  force  is  divided  into  four  divisions,  in  charge  of  four 
senior  clerks,  or  tellers,  between  whom  all  the  sheets  received  are  divided 
in  their  regular  order,  from  No.  1  to  No.  505,  each  number  representing 
a  firm  or  individual  clearing.  These  separate  divisions  are  organized 
into  examiners,  first  and  second  assistant  examiners,  and  checkers. 

There  is  an  Error  Department,  in  charge  of  an  assistant  teller,  with  his 
staff  of  clerks,  and  two  other  assistant  tellers  take  some  of  the  important 
work  of  their  seniors  in  the  first  handling  of  the  sheets.  A  number  of 
younger  clerks  have  charge  of  sorting  tickets  and  distributing  them  to 


THE  STOCK  EXCHANGE  CLEARING  HOUSE  429 

their  proper  divisions,  and  all  the  work  is  done  without  friction  or  con¬ 
fusion  of  any  kind. 

The  clerks  of  the  Clearing  House,  owing  to  their  training  and  experience, 
are  often  in  demand  (when  they  can  be  spared)  to  unravel  tangles  in 
brokers’  books,  created  by  very  exciting  and  busy  times. 

The  Clearing  House  Committee  has  now  been  in  existence  for  over 
eleven  years.  Its  personnel,  from  its  creation  to  the  present  day,  is  herewith 
given : 

CLEARING  HOUSE  COMMITTEE  OF  THE  NEW  YORK  STOCK  EXCHANGE 


1892-93  —  May  to  May. 

1896-97. 

1900-01. 

Francis  L.  Eames,  Chairman 

Robert  P.  Doremus,  Vice-Chairman 
Rudolph  Keppler 

F.  W.  Gilley,  Jr. 

D.  W.  Berdan 

Robert  P.  Doremus,  Chairman 

D.  W.  Berdan,  Vice-Chairman 

F.  W.  Gilley 

T.  L.  Manson 

R.  Keppler 

Robert  P.  Doremus,  Chairman 
Charles  Hazard,  Vice-Chairman 

T.  L.  Manson 

W.  H.  Granbery 

John  Wallace 

1893-94. 

1897-98. 

1901-02. 

Robert  P.  Doremus,  Chairman 

D.  W.  Berdan,  Vice-Chairman 

R.  Keppler 

F.  W.  Gilley,  Jr. 

T.  L.  Manson 

Robert  P.  Doremus,  Chairman 

R.  Keppler,  Vice-Chairman 

F.  W.  Gilley 

T.  L.  Manson 

Charles  Hazard 

Robert  P.  Doremus,  Chairman 
Charles  Hazard,  Vice-Chairman 

T.  L.  Manson 

W.  H.  Granbery 

John  Wallace 

1894-95. 

1898-99. 

1902-03. 

Robert  P.  Doremus,  Chairman 

D.  W.  Berdan,  Vice-Chairman 

F.  W.  Gilley,  Jr. 

T.  L.  Manson 

S.  J.  Harriott 

Robert  P.  Doremus,  Chairman 
Charles  Hazard,  Vice-Chairman 

T.  L.  Manson 

W.  H.  Granbery 

H.  G.  Campbell 

Robert  P.  Doremus,  Chairman 
Charles  Hazard,  Vice-Chairman 

W.  H.  Granbery 

F.  L.  Rodewald 

William  Robison 

1895-96. 

1899-1900. 

1903-04. 

Robert  P.  Doremus,  Chairman 

D.  W.  Berdan,  Vice-Chairman 

F.  W.  Gilley,  Jr. 

T.  L.  Manson 

S.  J.  Harriott 

Robert  P.  Doremus,  Chairman 
Charles  Hazard,  Vice-Chairman 

T.  L.  Manson 

W.  H.  Granbery 

John  Wallace 

Robert  P.  Doremus,  Chairman 
Charles  Hazard,  Vice-Chairman 

W.  H.  Granbery 

F.  L.  Rodewald 

William  Robison 

It  will  be  seen  that  with  the  exception  of  the  first  year,  when  the 
chairmanship  was  held  by  Mr.  Francis  L.  Eames,  that  office  has  been  filled 
continuously  by  Mr.  Doremus.  It  is  the  testimony  of  Mr.  Doremus’ 
colleagues  that  a  large  share  of  the  success  of  the  Clearing  House  is  due  to 
his  untiring  devotion,  patient  and  continued  efforts  to  develop  and 
improve,  and  to  his  remarkable  executive  ability.  His  physical  and 
mental  capacity  for  work  are  of  the  highest  grade— he  never  seems  to  tire 
or  relax.  The  Stock  Exchange  may  be  congratulated  upon  having  in  its 
service  as  chairman  of  this  great  committee  so  able  and  zealous  a  member 
as  Robert  P.  Doremus. 


Y 

THE  STOCK  TICKER 


By 


HORACE  L.  HOTCHKISS 


Y 

THE  STOCK  TICKER 


HORACE  L.  HOTCHKISS 


LECTRICITY  for  the  service  of  man  was  not  only  first  utilized 
in  the  nineteenth  century  but  through  the  various  discov¬ 
eries  and  mechanisms  of  Morse,  Wheatstone,  Edison,  Bell, 
Humstone,  Farmer,  Calahan,  Tesla,  Prescott,  and  other 
famous  inventors  was  made  practical  and  profitable  in 
both  commercial  and  domestic  life.  In  1867  Mr.  E.  A. 
Calahan,  who  had  been  associated  with  the  American  Telegraph  Com¬ 
pany  for  many  years,  as  a  telegraph  operator  and  manager  of  their  electric 
batteries,  conceived  the  idea  of  the  stock  telegraph  printing  instrument. 
Mr.  Calahan  had  noticed  the  congestion  of  business  around  the  halls  of 
the  Stock  Exchange,  which  was  largely  caused  by  the  brokers  and  their 
clerks  struggling  to  secure  the  latest  quotations  made  on  the  floor.  These 
were  recorded  on  suitable  pads  and  then  carried  by  hand  to  the  various 
Wall  Street  offices.  Active  brokers  and  their  messengers  were  at  that  time 
often  called  “pad  shovers,”  in  the  humorous  slang  of  the  day.  It  occurred 
to  Mr.  Calahan  that  an  instrument  might  be  constructed  which  would 
record  automatically  the  names  of  securities  and  the  figures  representing 
quotations  or  selling  prices.  The  necessity  of  such  an  invention  was 
questioned  by  many  of  the  most  experienced  bankers  and  brokers  of  that 
period,  some  of  them  declaring  that  they  and  their  customers  preferred  to 
have  quotations  brought  to  their  offices  by  the  “pad  shovers,”  as  it  gave 
them  an  opportunity  to  send  back  orders  to  be  executed  on  the  Exchange 
through  this  medium  of  communication. 

Mr.  Calahan  spent  several  months  in  perfecting  the  printing  or  record¬ 
ing  instrument,  and  succeeded  in  arranging  a  transmitter,  which  could 
operate  many  instruments  from  one  central  office.  He  had  these  details 


434 


THE  NEW  YORK  STOCK  EXCHANGE 


completed  in  the  summer  of  1867,  and  a  corporation  under  the  general 
laws  of  the  State  of  New  York,  called  the  “Gold  &  Stock  Telegraph 
Company,”  with  a  capital  of  $200,000,  was  organized  on  September  19, 
1867.  Messrs.  Elisha  W.  Andrews,  William  Muir,  George  B.  Field,  and 
Horace  L.  Hotchkiss  assisted  in  its  organization  and  early  development. 
Later  on,  Mr.  George  B.  Field  was  elected  president,  and  the  writer  of  this 
article  secretary  and  treasurer. 

Mr.  Robert  H.  Gallagher,  who  had  charge  of  the  Night  Exchange 
uptown  (which  was  used  by  operators  during  the  exciting  times  of  the  Civil 
War),  had  a  large  acquaintance  with  Wall  Street  brokers  and  was  engaged 
to  secure  patrons  or  subscribers  who  would  contract  to  pay  $6  per 


week  for  the  quotations, 
with  those  of  the  officers 
in  agreements  with  a 
brokers  of  the  Street. 
Stock  Exchange  granted 
of  the  company  to  go  on 
and  report  the  market 
In  December,  1867,  be- 
Year’s  day,  the  first  stock 
was  placed  in  the  office  of 
where  the  veteran  opera- 
his  headquarters.  The 
was  placed  in  the  office  of 
and  on  the  third  and 
were  placed  in  the  offices 
and  Lockwood  &  Co.,  re- 
struments  were  delivered 
tion.  Before  they  had 
days  the  company  had  on 
about  one  hundred  of  the 
members  of  the  Exchange. 


FIRST  TICKER  IN  USE.  1867. 


His  efforts,  in  conjunction 
of  the  company,  resulted 
number  of  the  prominent 
The  governors  of  the 
permission  for  employees 
the  floor  of  the  Exchange 
prices  by  this  new  system, 
tween  Christmas  and  New 
quotation  instrument 
David  Groesbeck  &  Co., 
tor,  Daniel  Drew,  made 
next  day  an  instrument 
Work,  Davis  &  Barton, 
fourth  days  instruments 
of  Greenleaf,  Norris  &  Co., 
spectively.  These  four  in- 
in  the  order  of  subscrip- 
been  in  operation  many 
its  list  of  subscribers 
prominent  bankers  and 
When  the  first  instrument 


began  work  in  the  office  of  David  Groesbeck  &  Co.,  it  naturally  created 
a  sensation  as  the  quotations  made  their  appearance  on  the  tape. 
The  crowd  around  it  was  at  least  six  deep,  and  the  person  nearest  the 
instrument  called  out  the  prices  to  the  wondering  assembly.  At  that 
time  Mr.  William  Heath  was  an  active  broker;  he  was  tall,  thin,  and 
exceedingly  energetic.  It  was  his  custom  to  run  from  office  to  office, 
supplied  with  the  latest  quotations  obtainable  from  the  floor  of  the 
Exchange.  He  was  generally  known  as  the  “American  Deer,”  and  now 
was  surprised  to  find  in  Groesbeck’s  office  a  crowd  watching  the  “ticker.” 
He  created  much  amusement  when  offering  his  quotations,  and  was  told 


THE  STOCK  TICKER 


435 


he  was  “too  late — we  have  them  all  on  the  tape.  ”  It  was  some  months, 
however,  before  he  thoroughly  realized  that  the  machine  could  outstrip 
the  “American  Deer”  in  the  race  of  quotations,  but  eventually  he  had  to 
surrender,  and  filed  his  order  for  one  of  the  company’s  instruments. 

The  operation  of  the  earliest  stock  quotation  instruments  required  the 
closest  attention  of  Mr.  Calahan  and  his  assistants.  A  source  of  annoy- 
ance  to  the  brokers  was  the  liability  of  the  instruments  to  get  out  of 
“unison  ”  and  thus  make  a  jumble  of  unintelligible  letters  or  figures  on  the 
tape.  To  adjust  the  instrument  back  to  “  unison  ”  required  the  visit  of  one 
of  the  employees  of  the  company  to  the  office  where  it  was  out  of  order, 
and,  as  calls  for  such  service  were  at  that  time  quite  frequent,  it  often 
became  necessary  for  the  treasurer,  superintendent,  and  even  the  office  boys 
to  respond  to  them.  Later  in  the  history  of  this  enterprise,  Mr.  Henry 
Van  Hoevenberg  invented  an  automatic  “unison”  adjustment,  which  was 
attached  to  the  Calahan  instrument  and  corrected  this  difficulty. 

As  it  was  at  that  time  claimed  that  the  stock  instruments  of  the 
Gold  &  Stock  Telegraph  Company  would  revolutionize  the  old  system  of 
reporting  prices,  they  were  naturally  placed  under  the  most  severe  tests  of 
adverse  criticisms,  not  only  as  to  their  capacity  for  responding  to  the 
mechanical  requirements  in  producing  an  accurate  and  immediate  report 
of  the  fluctuations  of  stocks  but  also  questioning  the  desirability  of  such 
an  innovation  on  the  old  style  of  making  known  the  market. 

Another  difficulty  which  caused  much  annoyance  to  the  management 
of  the  company,  and  also  to  the  bankers  and  brokers  in  their  offices  at  the 
time  of  the  introduction  of  this  system,  was  the  necessity  for  a  local  battery 
in  each  office  where  the  instrument  was  placed.  This  battery  consisted  of 
four  glass  jars,  then  known  as  the  carbon  battery,  supplied  with  a  liquid 
consisting  of  proper  proportions  of  sulphuric  acid  and  other  chemicals  in 
connection  with  zinc  and  carbon.  This  acid  had  to  be  renewed  twice  a 
week  in  the  early  morning  before  the  commencement  of  business,  and  it  was 
carried  around  in  pails  to  the  subscribers’  offices.  At  times  serious  as  well 
as  amusing  accidents  occurred  during  the  performance  of  this  duty- 
carpets  were  spoiled,  furniture  injured,  clothing  damaged— and,  in  fact,  at 
one  time  it  looked  as  if  the  sulphurous  influences  of  that  “  infernal  battery” 
would  discourage  the  use  of  the  instruments.  Fortunately,  before  the 
whole  system  was  abandoned,  Mr.  Calahan  proved  equal  to  the  crisis,  and 
arranged  a  plan  for  operating  the  instruments  by  means  of  a  large  system 
of  batteries  placed  in  a  building  equipped  for  that  purpose,  and  thereafter 
the  local  battery  in  the  bankers’  and  brokers’  offices  was  eliminated  from 
the  problem. 

The  “gold  indicator,”  which  had  been  inaugurated  in  the  Gold 
Exchange  by  S.  S.  Laws,  proved  to  be  of  great  value,  and  had  anticipated 


436 


THE  NEW  YORK  STOCK  EXCHANGE 


the  advent  of  the  stock  ticker  by  several  months.  Mr.  Laws  was  the  vice- 
president  and  presiding  officer  of  the  Gold  Exchange,  and  displayed  con¬ 
siderable  mechanical  ability  when  he  arranged  a  double-faced  gold  indicator 
—one  face  of  which  was  visible  in  New  Street  outside  the  Gold  Exchange, 
while  the  other  looked  inside  and  was  visible  to  members  on  the  floor. 
At  that  period  the  premium  on  gold  fluctuated  rapidly,  and  highly  excited 
crowds  often  stood  in  the  street  watching  this  indicator  and  the  varying 
changes  of  the  market.  It  was  quite  the  custom  to  regulate  the  day’s 
prices  of  many  staple  articles  of  commerce  by  the  opening  price  of  gold  at 
the  Gold  Exchange.  Early  each  morning  merchants  assembled  on  the 
street  to  watch  for  the  first  figures  of  the  gold  indicator,  and  then  hastened 
to  their  places  of  business  to  mark  a  corresponding  value  on  their  mer¬ 
chandise.  This  condition  of  affairs  on  New  Street  and  the  multitude  of 
messengers  that  were  kept  running  to  and  from  the  Gold  Exchange  suggested 
to  Mr.  Laws  the  plan  for  establishing  a  system  of  gold  indicators,  to  be 
operated  by  an  electric  current  from  the  Exchange,  and  set  up  in  the  various 
offices  connected  therewith,  so  that  every  fluctuation  of  the  market  could 
be  reported  to  all  subscribers  simultaneously. 

In  August,  1869,  the  Gold  &  Stock  Telegraph  Company  purchased 
from  S.  S.  Laws  his  patents,  inventions,  good  will,  and  all  his  interests  in 
the  gold  indicator  for  $25,000  in  cash  and  $75,000  of  the  capital  stock  of 
the  Gold  and  Stock  Telegraph  Company.  They  also  agreed  to  pay  to  Mr. 
Laws  $10,000  per  annum  during  the  continuance  of  the  premium  on  gold, 
and  this  royalty,  in  fact,  was  paid  until  January  1,  1879. 

At  the  time  of  the  organization  of  the  Gold  &  Stock  Telegraph  Com¬ 
pany  there  were  not  less  than  six  additional  general  telegraph  companies 
competing  for  the  business  of  the  bankers  and  brokers.  Nearly  every 
housetop  in  and  about  Wall  Street  was  cob  webbed  with  bare  and  uninsu¬ 
lated  wires.  Mr.  Calahan  felt  that  it  wrould  be  impossible  to  expose  his 
ticker  system  to  the  danger  of  contact  with  any  of  these  wires,  and  therefore 
decided  that  thoroughly  insulated  wires  should  be  used  on  the  lines  of  the 
company.  The  difference  in  the  cost  of  construction  between  perfectly  insu¬ 
lated  wires  and  the  uninsulated  was  in  the  ratio  of  40  to  1.  The  wisdom  of 
his  decision  was  soon  proved,  as  the  wires  of  the  company  were  not  disturbed. 
At  that  time  the  only  insulated  wire  that  could  be  secured  for  the  construc¬ 
tion  of  the  company’s  lines  was  A.  G.  Day’s  “Kerite  wire.  ”  As  it  was  then 
a  new  invention,  and  the  facilities  for  producing  it  were  very  limited,  the  cost 
to  the  company  in  those  early  days  was  equal  to  eight  cents  per  foot.  This 
same  wire  at  the  present  time  is  produced  in  vast  quantities  at  a  small 
fraction  of  a  cent  per  foot  and  of  the  same  standard  of  reliability. 

Before  the  end  of  the  first  year’s  operations  of  the  company  there  was 
a  general  demand  for  the  stock  ticker  by  members  of  the  Stock  Exchange 


THE  STOCK  TICKER 


437 


and  others  interested  in  the  stock  market.  Requiring  additional  funds  for 
constructing  the  lines  of  the  company  and  placing  instruments  in  service, 
they  found  it  necessary  to  increase  their  capital  from  $200,000  to  $500,000. 
This  was  accomplished  on  May  7,  1868.  On  September  4, 1869,  the  capital 
of  the  company  was  increased  to  $1,000,000,  a  portion  of  the  increase 
being  needed  to  purchase  the  gold  indicator  system  and  patents  of  S.  S. 
Laws. 

At  the  annual  meeting  of  the  company  on  September  7,  1869,  the 
following  gentlemen  were  elected  directors :  George  B.  Field,  Joseph  M.  Cook, 
Tracy  R.  Edson,  D.  J.  Garth,  S.  S.  Laws,  A.  F.  Roberts,  and  W.  B.  Clerke. 

The  growth  of  the  business  continued  with  giant  strides,  and  the  com¬ 
pany  soon  found  other  fields  of  operation.  Both  the  Produce  Exchange 
and  the  Cotton  Exchange  adopted  the  new  system  for  reporting  their  mar¬ 
kets,  and  the  financial  interests  in  and  about  Wall  Street  became  patrons 
of  the  “  General  News  Bureau,”  which  was  established  by  the  company  for 
reporting  over  its  wires  the  news  of  the  day  and  the  gossip  of  the  Street 
appertaining  to  financial  affairs. 

In  March,  1870,  General  Marshall  Lefferts  was  elected  a  director  and 
president  of  the  company,  and  on  October  11, 1870,  the  capital  stock  of  the 
company  was  further  increased  to  $1,250,000.  With  this  additional  capi¬ 
tal  it  secured  the  Page  patents  and  other  valuable  inventions.  As  the  busi¬ 
ness  of  the  company  in  1871  grew  to  be  very  profitable,  and  as  opportunity 
was  constantly  presented  for  the  extension  of  its  service  to  other  cities, 
negotiations  were  entered  into  with  the  Western  Union  Telegraph  Company, 
and  a  contract  followed  by  which  it  was  agreed  that  the  capital  stock  of  the 
Gold  &  Stock  Telegraph  Company  should  be  augmented  to  $2,500,000, 
the  increase,  viz.,  $1,250,000,  to  be  issued  to  the  Western  Union  Telegraph 
Company  for  its  Commercial  News  Department.  This  was  duly  accom¬ 
plished,  and  at  the  annual  meeting  of  the  company  held  in  September, 
1871,  the  Western  Union  Telegraph  Company  came  into  practical  control 
of  the  Gold  &  Stock  Telegraph  Company,  through  the  election  of  the 
following  Board  of  Directors :  James  H.  Banker,  Horace  F.  Clark,  William 
Astor,  Tracy  R.  Edson,  Marshall  Lefferts,  Alonzo  B.  Cornell,  and  Joseph 
M.  Cook. 

At  this  election  the  General  Superintendent,  Mr.  Calahan,  resigned  for 
the  purpose  of  inaugurating  the  system  in  London.  The  writer  of  this 
article  also  resigned  his  office  of  treasurer,  and  Western  Union  officials 
were  elected  to  fill  the  vacancies. 

The  origin  and  subsequent  history  of  the  Commercial  News  Depart¬ 
ment  of  the  Western  Union  Telegraph  Company  and  the  Gold  &  Stock 
Telegraph  Company  illustrate  how  a  small  beginning  is  often  followed  by 
a  phenomenal  growth. 


438 


THE  NEW  YORK  STOCK  EXCHANGE 


Before  the  days  of  the  Atlantic  cable,  Mr.  D.  H.  Craig,  of  Boston,  con¬ 
ceived  the  idea  of  training  pigeons  to  act  as  messengers  for  the  European 
news  brought  by  foreign  steamers  arriving  at  Halifax.  He  would  take  with 
him  a  half  dozen  of  his  pigeons,  board  the  incoming  steamer,  and  take 
passage  thereon  for  Boston.  Once  on  board  the  steamer,  he  would  secure 
copies  of  the  latest  dates  of  the  European  papers,  and  from  their  pages 
prepare  a  careful  digest  of  the  significant  political  and  commercial  news, 
written  upon  fine  manifolded  tissue  paper.  At  the  proper  moment  the 
pigeons  were  despatched  from  the  steamer  on  their  homeward  journey, 
and  with  fleet  wings  soon  reached  their  destination,  with  the  valuable 
reports,  which  were  quickly  transcribed  and  distributed  to  Mr.  Craig’s  sub¬ 
scribers  in  Boston,  and  by  telegraph  to  other  cities.  While  this  system 
seems  crude  and  unsatisfactory,  in  comparison  with  modern  methods  now 
in  use,  yet,  at  that  time,  the  fortunate  subscribers  to  Craig’s  “bird  mail” 
were  often  rewarded  in  their  market  operations  by  the  possession  of  early 
information. 

The  alliance  with  the  Western  Union  Telegraph  Company  proved  satis¬ 
factory,  and  the  dividends  on  the  enlarged  capital  were  continued,  and  were 
justified  by  the  increased  earnings  of  the  new  business  established  in 
this  and  other  cities  throughout  the  country.  The  Stock  Exchange  during 
the  six  years  referred  to  had  granted  to  the  Gold  &  Stock  Telegraph 
Company,  without  cost,  every  facility  for  inaugurating  and  developing  a 
business  which  then  had  grown  to  be  so  profitable. 

Early  in  1873  a  formidable  competitor,  the  Manhattan  Quotation 
Telegraph  Company,  appeared  in  the  field  and  offered  to  pay  not  only  fixed 
annual  rent  to  the  Stock  Exchange  for  the  privileges  enjoyed  by  the  Gold 
&  Stock  Telegraph  Company  but  in  addition  a  weekly  royalty  on  each 
ticker  in  use.  The  rivalry  resulted  in  the  immediate  reduction  of  the  charge 
by  the  Gold  &  Stock  Telegraph  Company  for  the  use  of  tickers  from  $6 
per  week  to  $10  per  month.  In  this  way  a  serious  warfare  commenced 
between  the  rival  concerns  which  proved  very  interesting  to  the  Stock 
Exchange  by  establishing  the  commercial  value  of  the  ownership  and 
control  of  the  quotations  made  on  the  floor  of  the  Exchange. 

The  Manhattan  Quotation  Company’s  instrument  was  the  invention  of 
Mr.  J.  E.  Smith.  Its  principal  features  were  that  the  name  of  the  stock  and 
the  quotation  following  were  printed  on  the  tape  in  a  single  line  from  a  single 
type  wheel,  and  that  it  was  provided  with  a  unison  device.  While  this  instru¬ 
ment  was  accurate  and  rapid  in  its  work,  its  method  of  printing  in  a  straight 
line  did  not  give  entire  satisfaction  to  subscribers;  nevertheless,  it  was 
thought  to  be  a  part  of  wisdom  to  absorb  this  company,  and  within  a  few 
months  thereafter  an  arrangement  for  an  exchange  of  stock  was  completed 
and  a  majority  interest  in  the  Manhattan  Quotation  Company’s  capital  stock 


THE  STOCK  TICKER 


439 


was  turned  over  to  the  treasury  of  the  Gold  &  Stock  Telegraph  Company, 
and  the  competition  was  over.  During  this  period  of  growth  the  Gold  & 
Stock  Telegraph  Company  secured  many  other  valuable  inventions,  not 
only  for  protection  in  the  future  but  also  for  the  purpose  of  improving  the 
system  then  operated.  At  this  time  the  charge  for  use  of  tickers  was 
restored  to  $25  per  month.  Such  inventors  as  Van  Hoevenberg,  Gray, 
Phelps,  Scott,  Kenny,  Chester,  Pearson,  Wessmann,  Knudson,  besides  those 
formerly  mentioned  in  this  article,  contributed  valuable  devices  and 
improvements  in  perfecting  the  lines,  batteries,  instruments,  and  systems 
operated  by  the  Gold  &  Stock  Telegraph  Company. 

In  developing  the  systems  of  the  company,  one  of  which  was  known  as 
the  “Financial  News  Bureau,”  the  Gold  &  Stock  Telegraph  Company 
secured  the  cooperation  of  Mr.  John  J.  Kiernan,  who  had  been  furnishing 
the  Street  with  reports  of  the  foreign  markets  and  other  news  by  means  of 
“tissues,”  which  were  distributed  by  hand  from  his  offices  to  the  bankers 
and  brokers  who  were  subscribers  to  this  news.  After  securing  Mr.  Kiernan’s 
services  the  company  inaugurated  a  system  of  wires  and  instruments  for 
this  purpose.  He  proved  to  be  an  interesting  personality,  and  was  quite 
popular  in  the  Street,  but  his  friends  insisted  upon  his  entering  politics. 
After  serving  as  an  Alderman  in  Brooklyn,  he  was  elected  State  Senator 
and  sent  to  Albany.  But  he  soon  found  that  politics  would  require  most 
of  his  time,  and  gradually  withdrew  from  the  active  management  of  the 
news  department. 

The  next  competitor  to  appear  in  the  field  as  a  rival  to  the  Gold  & 
Stock  Telegraph  Company  was  the  Commercial  Telegram  Company,  which 
controlled  a  printing  instrument,  the  invention  of  Mr.  Stephen  D.  Field. 
This  company  ignored  all  patents  and  other  rights,  and  claimed  all  privi¬ 
leges  on  the  ground  that  its  instrument  was  superior  to  all  others.  The 
Stock  Exchange  granted  to  the  Commercial  Telegram  Company  equal  facili¬ 
ties,  and  the  competition  for  business  resulted  in  again  lowering  the  monthly 
charge  for  tickers  from  $25  to  $10.  As  the  competition  between  the 
Gold  &  Stock  Telegraph  Company  and  the  Commercial  Telegram  Com¬ 
pany  became  more  active,  the  Stock  Exchange  assumed  a  greater  authority 
over  the  quotations  made  on  the  floor  of  the  Exchange.  In  assuming  this 
control,  on  October  1, 1885,  it  employed  reporters,  who  gathered  the  prices 
and  turned  these  quotations  over  to  the  two  companies.  As  a  result  the 
question  of  how  these  prices  were  to  be  sent  out,  and  to  whom  as  sub¬ 
scribers  they  were  to  be  sent,  reverted  back  to  the  Stock  Exchange,  and  in 
any  applications  for  instruments  either  company  was  required  to  obtain 
the  approval  of  the  proper  officer  of  the  Board.  This  prevented  the  bucket 
shops  from  obtaining  the  quotations  directly  from  the  instruments.  The 
business  continued  to  grow,  and  the  rivalry  between  the  two  companies 


440 


THE  NEW  YORK  STOCK  EXCHANGE 


increased  until  the  year  1890,  when  the  Exchange  secured  a  majority  inter¬ 
est  in  the  Commercial  Telegram  Company,  which  was  reorganized  as  the 
New  York  Quotation  Company,  and  at  the  same  time  an  arrangement  was 
made  with  the  Gold  &  Stock  Telegraph  Company  by  which  the  latter 
company  should  practically  discontinue  its  services  to  members  of  the 
Stock  Exchange  below  Canal  Street,  and  the  rate  of  service  should  be 
restored  to  $25  per  month. 

In  1873  the  Gold  &  Stock  Telegraph  Company  paid  into  the  treasury 
of  the  New  York  Stock  Exchange,  as  its  portion  of  rent  and  royalty,  $4,705. 
In  1874  the  company  paid  to  the  Stock  Exchange  $15,731  as  rent  and 
royalty  on  instruments  in  service.  Between  July,  1875,  and  August,  1877, 
it  paid  to  the  Stock  Exchange  $50,857.16;  between  August,  1877,  and 
September,  1885,  for  like  privileges,  the  company  paid  $144,000 ;  between 
September,  1885,  and  July,  1889,  it  paid  $94,162.93.  Between  July,  1889, 
and  January,  1892,  owing  to  protracted  negotiations  with  the  Stock 
Exchange  for  a  new  contract,  the  Gold  &  Stock  Telegraph  Company 
made  no  payments  to  the  Stock  Exchange,  but  from  January,  1892,  until 
January  1, 1893,  the  rate  was  $100  per  day,  and  was  paid  to  the  Exchange. 
From  January  1,  1893,  to  May  1,  1902,  the  Gold  &  Stock  Telegraph 
Company  paid  an  annual  rental  of  $27,000,  amounting  to  $252,000.  On 
May  1,  1902,  the  Stock  Exchange  increased  the  rental  to  $100,000  per 
annum,  which  sum  is  now  paid  by  the  Gold  &  Stock  Telegraph  Company. 

The  original  introduction  of  Mr.  Calahan's  invention  seemed  most 
appropriately  timed  to  meet  the  requirements  of  the  Stock  Exchange  and 
other  exchanges  in  the  distribution  of  the  quotations  of  the  various 
markets  by  telegraphic  printing  instruments.  Even  the  London  Stock 
Exchange  adopted  the  Calahan  instrument  in  1872;  the  Exchange  Tele¬ 
graph  Company  of  London  was  organized,  and  Mr.  Calahan  was  sent  to 
London  for  the  purpose  of  introducing  the  stock  quotation  system  there. 
The  writer  of  this  article  is  a  director  of  that  company  and  for  over  twenty- 
five  years  has  forwarded  by  cable,  to  the  Exchange  Telegraph  Company  of 
London,  the  opening  prices  made  on  the  floor  of  the  New  York  Stock 
Exchange,  and  other  news  of  financial  interest. 

The  development  of  the  Gold  &  Stock  Telegraph  Company  has  greatly 
depended  upon  the  ability  and  character  of  its  working  force.  One  of  its 
most  valued  employees  was  Timothy  J.  Sullivan,  who  operated  by  hand  the 
transmitter  during  several  years  preceding  the  introduction  of  the  present 
automatic  mechanism.  Another  faithful  adherent,  Mr.  Samuel  M.  Taylor, 
became  the  financial  officer  of  the  company  in  1876,  and  now  occupies  the 
position  of  its  auditor. 

In  referring  to  the  financial  growth  of  the  Gold  &  Stock  Telegraph 
Company  it  should  be  mentioned  that  its  capital  wras  increased  in  March, 


THE  STOCK  TICKER 


441 


1881,  to  $5,000,000,  and  soon  after  this  was  accomplished  the  Western 
Union  Telegraph  Company  assumed  a  lease  of  the  system  of  lines,  instru¬ 
ments  and  property  of  the  Gold  &  Stock  Telegraph  Company,  guarantee¬ 
ing  six  per  cent,  per  annum  on  the  capital  stock.  The  control  of  the  New 
York  Quotation  Company  by  the  New  York  Stock  Exchange,  through  an 
ownership  of  a  majority  of  the  capital  stock  of  that  company,  has  proved 
profitable  and  satisfactory  to  the  members  of  the  Exchange,  who  are  the 
patrons  of  the  company.  The  wisdom  displayed  when  the  Stock  Exchange, 


in  1890,  secured  a  majority  of 
the  Commercial  Telegram 
for  some  years  not  fully  ap- 
at  last  been  demonstrated; 
such  ownership  was  it  possible 
present  New  York  Quotation 
corporation  has  placed  the 
position  impregnable  for  con- 
of  collecting  and  distributing 
made  on  the  floor 
To  the  committee 
matter  much  credit 
all  it  is  to  the  de- 
Mr.  R.  H.  Thomas, 
of  the  New  York 
pany,  that  the  Stock 
debt  of  gratitude 
solution  which 
fruitful  out  of  a 
When  one  considers 
telegraph  wires 
every  city,  town, 
throughout  the 


THE  TICKER  OF  TO-DAY. 


the  capital  stock  of 
Company,  though 
predated,  has  thus 
since  only  through 
to  organize  the 
Company,  which 
Stock  Exchange  in  a 
trol  of  the  methods 
the  quotations 
of  the  Exchange, 
in  charge  of  this 
is  due,  but  above 
voted  services  of 
who  is  the  president 
Quotation  Corn- 
Exchange  owes  a 
for  the  successful 
brought  results  so 
difficult  problem, 
the  vast  network  of 
reaching  out  to 
village,  and  hamlet 
continent,  it  would 


seem  almost  impossible  to  estimate  how  far  the  capacity  for  the  distribu¬ 
tion  of  the  quotations  can  be  extended.  The  Western  Union  Telegraph 
Company,  with  its  trunk  lines  pulsating  each  day,  between  10  a.  m.  and  3 
p.  m.,  with  a  constant  stream  of  market  quotations  —  and  by  means  of  “  relay 
and  sounder”  in  every  office  where  these  trunk  lines  pass,  and  of  the  branch 
lines  running  in  every  direction  to  all  places  and  to  all  people,  even  to  those 
outside  of  their  23,000  offices — can  drop  off  duplicate  copies  of  these  prices 
or  quotations  from  all  the  important  exchanges. 

The  growth  of  this  business  is  of  great  moment  to  the  Stock  Exchange, 
for  it  is  through  the  instant  dissemination  of  the  quotations  made  on  its 
floor  that  the  active  and  continuous  interest  in  the  markets  is  sustained. 


VI 

THE  LOAN  MARKET 

By 


EMERSON  CHAMBERLIN 


VI 

THE  LOAN  MARKET 


BY 

EMERSON  CHAMBERLIN 

HE  Wall  Street  Loan  Market,  before  its  formation  as  a 
department,  was  without  form  and  void,  and  darkness 
regarding  its  history  has  prevailed  until  the  present  time. 

One  of  the  difficulties  in  treating  this  subject  is  the  fact 
that  the  Loan  Market  has  no  printed  record  of  its  trans¬ 
actions;  their  amounts,  rates,  and  “collateral”  are  private 
matters,  of  which  the  memoranda  are  soon  destroyed  or  lost.  Our  facts 
must  be  searched  for  in  files  of  newspapers  and  among  the  dusty  books 
and  worn  stock-notes  of  firms  old  in  the  Street.  The  quest  would  be 
hopeless  were  there  not  still  living  some  of  the  men  whose  experience  covers 
more  than  half  a  century.  The  best  part  of  this  record  has  been  gathered 
from  survivors  prominent  in  some  of  the  greatest  financial  battles  of  the 
past  and  still  in  active  service,  a  thin,  gray  line  of  veterans,  whose  ranks 
the  old  enemy,  Time,  is  steadily  depleting. 

Yet  the  Loan  Market  is  of  somewhat  recent  date,  and,  like  the  Bank 
and  Stock  Exchange  Clearing  Houses,  had  to  wait  until  all  the  surrounding 
conditions  were  prepared  for  its  systematization.  During  the  early  history 
of  the  Street,  and  down  to  1857,  stock  transactions  were  effected  largely 
upon  time  options  running  from  ten  to  ninety  days.  In  an  old  sales  list  of 
1837,  out  of  a  total  of  6,700  shares,  4,400,  or  nearly  two-thirds,  were 
bought  and  sold  upon  option.  This  relieved  the  broker  from  the  necessity 
of  borrowing  from  day  to  day.  In  fact,  the  banker  and  the  broker  repre¬ 
sented  different  professions ;  the  banker  carrying  the  securities,  and  the 
broker’s  duties  ending  with  the  purchase  or  sale  of  the  stock. 

The  business  methods  of  the  time  were  modelled  more  after  the  mercan¬ 
tile  than  the  banking  world.  The  Stock  Exchange  consisted  of  a  small  and 


446 


THE  NEW  YORK  STOCK  EXCHANGE 


select  body  of  men  well  known  to  each  other,  most  of  whom  had  spent  their 
lives  in  the  Street.  Money  for  bank  balances  was  frequently  loaned  without 
any  other  security  than  the  broker’s  word.  “  Anything  over  to-day  ?  ”  was 
heard  at  that  time  in  brokers’  offices  as  in  mercantile  stores.  If  Colonel  Y. 
wanted  a  bank  balance,  he  stepped  into  Mr.  W.  ’s  office,  and  was  handed  a  check 
for  the  amount,  and  Mr.  W.  was  accommodated  in  turn  some  other  day. 

The  panic  of  1857  effected  the  first  and  most  important  change  in  the 
methods  of  Wall  Street.  Firms  that  had  been  in  business  for  half  a  century 
were  carried  down,  never  to  recover,  while  a  different  class  of  men  arose, 
and  the  happy  days  of  borrowing  without  collateral  security  passed  away 
forever.  The  impetus  given  to  business  during  the  war  period  called  for  an 
equivalent  supply  of  capital.  While  the  banks  were  still  relied  upon  to 
supply  the  bulk  of  the  loans,  the  increase  in  the  number  of  institutions  and 
private  lenders  that  came  into  the  Street  to  use  their  surplus  funds  is  notice¬ 
able  ;  the  fire  insurance  companies  were  at  times  large  lenders,  and  so  were 
shipping  houses,  such  as  Wetmore,  Cryder  &  Co. ;  Sawyer  Wallace  &  Co.,  and 
Harbuck  &  Co.  These  were  supplemented  by  banking  houses  and  commis¬ 
sion  brokers,  among  them  the  firms  of  Evans  &  Thompson,  Weeks  & 
Warren,  Oswald  Cammann,  and  Treadwell,  Ketcham  &  Co.  Wealthy  men, 
such  as  Cornelius  Vanderbilt,  William  B.  Astor,  Erastus  Corning,  and 
Watts  Sherman,  putting  aside  their  prejudices  against  stock  speculations, 
found  it  pleasant  and  profitable  to  lend,  occasionally,  to  the  brokers. 

The  number  and  variety  of  lenders  made  it  easier  for  stock  houses  to 
carry  their  customers’  accounts  without  paying  the  “ shaves”  on  time 
options.  The  brokers  had  no  prejudice  as  to  the  sources  of  supply,  and 
borrowed  as  cheerfully  from  the  Greenwood  Cemetery  Association  as  from 
a  life  insurance  company  or  some  private  capitalist. 

Between  1863  and  1864  the  old  and  cumbersome  method  of  the 
delivery  of  stocks  by  transfer  was  replaced  by  the  present  system  of 
certificates  “with  power.”  While  this  change  was  of  immense  advantage 
in  receiving  and  delivering  stocks,  it  also  made  the  handling  of  collateral 
securities  in  loans  much  simpler  and  easier,  thus  benefiting  both  borrower 
and  lender.  The  actual  certificates  with  blank  “power”  were  pledged, 
accompanied  by  a  stock  note,  of  which  the  following  blank  form  indicated 
one  of  the  styles  most  in  use : 

Stock  Loan  Note.  New  York, _ 18 

_ have - 

- - - against  which _ have 

deposited  with _ 

dollars  as  Collateral  Security,  either  party  having  the  right  to  call  for  an  increase  or 
a  reduction  of  deposit  during  the  pendency  of  this  contract,  to  meet  the  fluctuations 
of  the  market. 

- to  pay - per  cent,  interest 

_ 18 


THE  LOAN  MARKET 


447 


The  institutions  lending  money  in  the  Street  were  reinforced  by  the 
organization  of  the  Union  Trust  Company,  in  1864.  The  Bank  of  Montreal 
and  the  Bank  of  British  North  America  also  came  into  the  market  as 
lenders.  Among  the  banking  capitalists  were  August  Belmont  &  Co., 
Winslow, Lanier&Co.;  L.von Hoffmann&Co.;  Schuchardt&Gebhard, Ballin 
&  Sanders,  Hallgarten  &  Co.,  Ketcham,  Son  &  Co. ;  A.  G.  Hemingway, 
Harrison  Durkee,  Dykers  &  Alstyne,  and  William  and  John  O’Brien.  The 
last  two  are  dear  to  the  memory  of  every  old  boy  in  the  Street,  for  a  lunch 
of  cheese  crackers  and  gingerbread  was  spread  in  their  offices,  and  the  good, 
hungry  boy  was  always  invited  to  partake. 


THE  LOAN  CROWD 

Before  1869  the  borrowing  and  lending  of  stocks  was  done  from  office 
to  office.  The  cashier  or  book-keeper  made  out  his  list  of  stocks  to  be 
borrowed  or  lent  in  the  morning.  This  he  showed  to  the  Board  member 
before  the  opening  of  business,  and,  after  consultation,  would  himself  make 
arrangement  to  borrow,  lend,  or  renew  with  the  firms  where  he  thought  he 
could  be  accommodated.  The  time,  trouble,  and  worry  of  this  arrangement 
can  be  appreciated  only  by  those  who  were  in  business  during  those  happy- 
go-lucky  days — when  boys  dropped  certificates  of  stock  in  the  Street,  when 
mislaid  checks,  a  week  or  two  old,  were  found  in  desk  drawers,  and  a  search 
for  lost  certificates  sometimes  revealed  them  carefully  tucked  inside  the 
Board  member’s  hat.  The  money  market  was  all  over  the  Street.  The 
banks  generally  demanded  the  top  rate  and  were  the  last  to  be  applied  to 
for  loans.  Reports  from  the  Exchange  were  slow  in  delivery,  and  purchases 
or  sales  for  cash  coming  in  late  would  upset  the  whole  arrangement  of  the 
office.  It  was  then  that  the  office  members  of  the  firm  became  busy,  while 
the  Board  member  remained  serene.  His  judgment  was  seldom  appealed 
from.  A  seat  in  the  Exchange  was  supposed  to  convey  a  wisdom  and 
knowledge  of  finance  to  which  no  mere  outsider  could  attain. 

The  condition  described  continued  until  1869,  when  a  member  of  the 
Board — having  many  loans  to  attend  to — conceived  the  idea  of  having  all 
such  transactions  made  in  the  Exchange,  and  with  this  purpose  started 
the  “Loan  Crowd.”  The  story  of  the  incidents  leading  up  to  its  establish¬ 
ment  is  told  in  another  part  of  this  work.  Coming  at  a  time  which  seemed 
ripe  for  such  an  experiment,  although  its  growth  was  gradual,  its  success 
was  assured.  The  Board  sessions  were  held  at  that  time  on  the  upper  floor 
of  the  present  building,  and  between  the  first  and  second  calls  the  members 
would  meet  in  that  part  of  the  room  which  came  to  be  recognized  as  the 
Loan  Market,  and  there  make  their  exchanges  of  stocks.  It  is  hardly 
necessary  to  say  that  the  originating  member  was  always  on  hand.  The 


448 


THE  NEW  YORK  STOCK  EXCHANGE 


time  occupied  was  from  one  to  two  hours,  and  it  always  ended  at  the 
beginning  of  the  “second  call.”  As  transactions  increased,  the  time  was 
extended,  and  upon  the  abandonment  of  the  call  system  there  was  a  con¬ 
tinuous  loan  market.  The  first  effect  of  the  new  system  was  seen  in  the 
rapidity  of  the  transactions,  business  which  formerly  had  dragged  through 
an  entire  morning  now  being  done  in  an  hour,  or  less,  and  with  much  more 
satisfaction.  Another  effect,  which  was  not  so  noticeable  at  first,  was  the 
decrease  in  number  and  rates  of  time  options.  At  an  early  period,  as  has 
been  explained,  the  bulk  of  the  business  upon  the  Exchange  was  done  upon 
time,  cash  or  regular  transactions  being  the  exceptions.  The  object  of  this 
was,  of  course,  the  protection  of  the  bull  customer  from  a  tight  money 
market  and  the  bear  speculator  from  a  corner.  As  money  grew  more  plen¬ 
tiful,  and  issues  of  stocks  larger,  these  dangers  became  lessened,  and  sales  on 
options  at  the  Exchange  had  decreased.  A  very  large  business,  however, 
was  still  done  which  was  not  reported  on  the  Board  lists.  Certain  houses 
with  large  capital  and  facilities  made  the  borrowing  and  lending  of  stocks 
a  special  and  very  profitable  feature  of  their  trade ;  and  it  would  sometimes 
happen,  in  a  rapidly  fluctuating  market,  that  a  stock  bought  for  cash  and 
sold,  buyer  30,  one  day,  would  be  sold  for  cash  and  bought,  seller  30,  the 
next  day,  a  commission  being  made  on  both  transactions.  There  were 
other  houses  that  did  their  own  “turning,”  and  the  habit  of  charging  a  too 
inactive  account  one-quarter  per  cent,  at  the  end  of  thirty  days  was  not 
at  all  uncommon.  This  was  called  stimulating  the  account.  The  Loan 
Crowd,  affording  a  market  and  introducing  competition,  reduced  the  neces¬ 
sity  for  these  extra  taxes  upon  stock  transactions,  and  helped  to  increase 
the  business  of  the  Street  by  giving  protection  at  a  less  cost.  As  an 
evidence  of  this  fact,  a  house  doing  the  largest  option  business  at  the  time 
reported  that  their  profits  had  been  cut  almost  in  half  after  the  first  year 
of  the  Loan  Market’s  establishment. 

The  same  relative  locality,  toward  Broad  Street,  occupied  by  the  crowd 
upon  its  first  day’s  business  (amidst  all  the  changes  and  extensions  of  the 
Board  Room),  has  been  always  retained.  In  1878  the  Loan  Market  was 
given  a  post  to  mark  its  place  upon  the  floor ;  this  was  of  wood,  afterward 
replaced,  in  1881,  by  the  present  one  of  iron,  which  has  always  borne  the 
number  10. 

The  borrowing  and  lending  of  money  in  the  crowd  proceeded  but  slowly; 
small  amounts  were  loaned,  but  the  banks  and  banking  houses  were  very 
conservative ;  money  then  was  an  aristocrat  and  hated  anything  new.  The 
result  was  that  in  dull  times  large  balances  were  carried  in  the  banks,  at  a 
loss  of  interest,  which  might  have  been  lent  in  the  market.  Their  attitude 
is  shown  by  the  following  conversation  between  Mr.  C.  0.  Baker  and  Presi¬ 
dent  Kitchen,  of  the  Park  Bank:  “Mr.  Kitchen,  there  is  a  good  demand 


THE  LOAN  MARKET 


449 


for  money  in  the  Exchange;  why  don’t  you  let  me  lend  some  for  you?” 
“Why,  Mr.  Baker,  I  should  not  like  to  do  that,  but  if  you  hear  of  any  one 
who  wishes  to  borrow,  send  him  up  to  us.”  The  private  lenders  were 
the  first  to  take  advantage  of  the  opportunity  of  lending  money  in  the 
Exchange.  Among  these  were  Winslow,  Lanier  &  Co.;  L.  T.  Hoyt,  James 

M.  Hartshorne  &  Bro.,  and  Alexander  Taylor  &  Co.  The  last  three  were 
also  large  lenders  of  time  money.  The  Third  National  Bank,  Mr.  Conrad 

N.  Jordan  then  being  cashier,  was  the  first  to  break  the  custom  and  lend 
money  through  a  broker ;  Russell  Sage  and  the  Union  Trust  Company  were 
also  added  to  the  list ;  and  the  Loan  Crowd  became  the  recognized  money 
market  and  made  the  rates  for  the  Street.  During  part  of  this  time  the 
Exchange  occupied  the  rooms  in  Lord’s  Court.  There  had  been  a  desultory 
Street  money  market  at  the  corner  of  William  Street  and  Exchange  Place, 
and  when  the  Board  removed  to  Broad  Street  this  market  followed  to  the 
southeast  corner  of  Broad  Street  and  Exchange  Place,  now  occupied  by  the 
Broad  Exchange  Building.  It  was,  however,  an  irregular  institution,  used 
principally  in  times  of  distress  and  by  needy  or  belated  borrowers. 

The  Loan  Crowd  during  the  morning  hours  of  an  ordinary  day  is  rather 
quiet,  the  specialist  being  at  times  almost  alone,  which  is  very  depressing 
for  him,  his  commission  depending  on  his  making  new  loans,  the  rate  being- 
50  cents  a  hundred,  with  no  payment  for  renewals.  Between  noon  and 
3  p.  m.  the  money  brokers  appear  to  make  or  renew  loans.  There  are  some 
early  borrowers,  but  the  greater  number  do  not  come  in  till  after  delivery 
hour,  2:15  p.  m.,  has  passed  and  they  know  how  they  stand.  The  brokers 
who  lend  are  sometimes  limited  as  to  interest  rates  and,  occasionally,  as  to 
the  minimum  amount  in  a  loan.  There  is  one  house  which  will  not  lend  less 
than  $100,000  in  any  one  loan,  but  which  will  rely  on  the  broker  as  to 
rates.  The  broker  has  to  know  something  about  the  standing  of  the 
borrower,  the  kind  of  collateral  he  sends  in,  and  the  time  for  which  the  loan 
is  likely  to  stand ;  otherwise  he  is  apt  to  have  to  do  his  work  over.  The 
borrower,  on  the  other  hand,  wants  a  lender  who  is  good,  who  is  not 
prejudiced  about  collaterals,  and  who  will  let  his  loan  remain  and  renew  at 
fair  rates.  Prejudices  and  preferences  play  a  more  important  part  here 
than  in  the  Stock  Market;  certain  houses  and  institutions  are  carefully 
avoided  by  some  borrowers  which  are  perfectly  acceptable  to  others ;  on 
the  other  hand,  the  lender  will  discriminate  in  his  selection  of  borrowers. 
Occasionally  word  will  be  sent  to  the  broker  to  stop  lending  to  certain 
firms,  for  reasons  which  seem  good  and  sufficient  in  the  bank  parlor  or 
offices.  The  majority  of  the  men  who  lend  money  for  others  have  done  so 
for  years,  and  it  is  well  known  whose  capital  they  represent.  There  is  one 
man  who  has  attended  to  the  loans  of  a  large  banking  house  for  thirty-five 
years,  and  whose  judgment  has  seldom  been  questioned  during  that  term. 


450 


THE  NEW  YORK  STOCK  EXCHANGE 


While  in  the  beginning  the  custom  was  for  one  man  to  lend  only  for  one 
firm  or  institution,  the  tendency  now  is  toward  a  concentration  of  capital  in 
one  man’s  hands — a  broker  representing  a  dozen  or  more  banks,  corpora¬ 
tions,  and  private  lenders.  With  a  corresponding  increase  in  amount  of 
capital,  this  tends  to  an  equalization  of  rates  and  is  an  important  force 
in  allaying  a  panic,  money  to  be  lent  in  the  market  being  much  easier 
managed  by  one  man  than  by  a  dozen.  This  part  of  the  subject  will  be 
spoken  of  later  in  connection  with  the  pooling  of  money  by  banks.  No 
record  is  kept  of  the  amount  of  loans,  of  either  stocks  or  money  made  in  a 
day,  though  in  active  times  they  must  foot  up  in  very  large  figures.  An 
idea  of  the  amount  of  money  lent  may  be  had  from  the  report  of  one  broker 
who  lent  $12,000,000  in  one  day. 

Thus,  from  the  very  modest  beginning,  in  1869,  the  Loan  Crowd  in  the 
Board  Room  has  grown  to  be  the  recognized  market  for  loans  of  stocks 
and  money,  and  one  of  the  most  important  departments  of  the  Stock 
Exchange.  Started  impulsively,  without  preparation  or  any  carefully 
wrought-out  plan,  it  grew  up,  evolving  its  own  laws  and  customs,  unnoticed 
and  unhampered  by  decisions  or  legislation,  and  from  these  very  conditions, 
which  seemed  to  accord  with  the  spirit  and  genius  of  the  times,  achieved  all 
the  more  success.  The  present  writer,  whose  connection  with  it  dates  from 
its  first  day,  can  look  at  it  now  with  a  feeling  of  pride  in  its  growth  and 
usefulness,  the  scene  of  many  exciting  episodes  and  of  many  pleasant 
memories. 

A  short  description  of  the  workings  of  the  Loan  Crowd  after  3p.  m. 
may  be  of  interest  to  those  not  familiar  with  its  daily  methods. 

THREE  O’CLOCK  IN  THE  LOAN  CROWD 

It  is  3  o’clock  on  the  Stock  Exchange.  The  gongs  have  ceased  sounding 
and  the  chairman’s  hammer  has  notified  the  members  on  the  floor  that 
business  for  the  day  has  ended.  A  fine  of  $50  is  the  penalty  for  every 
transaction  made  on  the  floor  after  this  announcement,  if  reported  to  the 
Governing  Committee. 

The  excited  groups  around  the  active  stocks  grow  smaller  and  quieter. 
The  trader  takes  his  final  look  for  the  day,  and  the  worn-out  specialist 
sends  out  his  last  reports.  The  majority  of  members  move  toward  the 
different  exits,  grateful  to  breathe  a  little  of  the  outside  air  and  seek  the 
comparative  quiet  of  their  offices.  But  a  small  contingent  remain  and 
work  their  way  toward  the  part  of  the  room  where  Post  No.  10  stands  out 
with  the  sign  and  inscription  upon  it— “Last  Loan,  2%  per  cent.” 

The  majority  of  these  brokers  carry  books  or  memoranda  in  which  are 
the  names  of  stocks  and  bonds  to  be  borrowed  or  lent.  The  crowrd  is  not 


THE  LOAN  MARKET 


451 


very  large  or  vociferous  —  it  makes  a  fair  degree  of  noise,  however,  each 
man  shouting  what  he  will  borrow  or  lend,  and  also  crying  out  the  names 
of  the  firms  with  which  he  wishes  to  renew  the  loans  of  yesterday.  The 
brokers  dart  in  and  out.  They  wiggle  from  one  side  of  the  crowrd  to  the 
other.  They  rapidly  check  off  the  results  in  their  loan  books,  and  as  soon 
as  this  is  completed  disappear  to  the  washroom,  the  office,  or  home. 

These  brokers  are  the  unfortunates  who  are  obliged  to  take  care  of  the 
loan  books.  Some  are  the  heads  of  firms — important  men  who  make  a 
specialty  of  borrowing  and  lending  stocks  and  money;  more  are  the 
ordinary  commission-house  brokers,  generally  the  junior  partners,  and 
others  are  the  “$2  brokers,”  who  take  charge  of  the  loans  for  the  houses 
that  give  them  business.  There  is  also  a  specialist  loan  broker,  but 
he  has  little  to  do  at  this  time  of  day,  his  activity  showing  itself  during  the 
earlier  hours. 

The  crowd  gradually  thins  out,  and  after  a  few  more  reports  are  made 
all  is  silent  and  the  floor  is  given  over  to  the  sawdust  men  and  the  sweepers. 

The  market  for  borrowing  and  lending  has  closed  for  the  day,  and  Post 
No.  10  stands  alone,  bearing  aloft,  amidst  a  wilderness  of  scattered  paper, 
the  sign  and  inscription  —  “Last  Loan,  3  per  cent.”  r-the  final  quotation 
in  the  day’s  work. 

The  Loan  Crowd  has  but  once  had  to  suspend  its  operations  in  the 
Board  Room.  In  the  panic  of  1873  it  shifted  its  quarters,  during  the 
closure  of  the  Exchange,  to  the  corner  of  Broad  Street  and  Exchange  Place, 
taking  a  position  in  front  of  what  is  now  the  Broad  Exchange  Building. 
Throughout  its  temporary  existence  of  ten  days  this  market  was  thronged 
by  excited  borrowers  and  attended  by  a  small  number  of  enterprising 
capitalists.  What  few  loans  wrere  made  were  at  the  rate  of  seven  per  cent, 
interest  and  from  two  to  four  per  cent,  premium  overnight.  One  large  house 
had  to  borrow  $800,000,  for  which  it  paid  $10,000  a  day  and  seven  per 
cent,  interest.  The  same  rate  was  paid  for  $1,000,000  by  Jay  Cooke  &  Co. 
a  few  days  before  their  failure.  Certified  checks  sold  at  a  discount  for  bills, 
and  greenbacks  brought  five  per  cent,  premium.  It  was  during  this  great 
disturbance  that  a  new  factor  affecting  the  Loan  Market  made  its  appear¬ 
ance.  This  needs  some  mention,  as  its  results  were  very  important  at 
that  time,  and  its  use  in  succeeding  critical  periods  most  beneficial.  The 
Clearing  House  for  the  associated  New  York  banks  was  started  in  October, 
1853,  with  fifty  banks  as  members  of  the  Association.  The  average  daily 
clearings  for  the  first  twelve  months  wrere  $19,104,504,  and  the  total  for 
the  year  $5,750,455,987.  The  Clearing  House  banks  had  vainly  tried  to 
stem  the  panic  of  1857,  and  had  to  suspend.  Three  years  later,  through 
the  efforts  of  James  Gallatin,  aided  by  some  of  the  presidents  of  the  other 
banks,  the  panic  of  1860  wfas  allayed  by  making  their  specie  a  common 


452 


THE  NEW  YOIIK  STOCK  EXCHANGE 


fund.  The  panics  of  1869,  1870,  1871,  and  1872  found  them  prepared 
and  with  no  necessity  for  any  combination;  but  in  1873  they  adopted  a 
new  method  by  issuing  Clearing  House  certificates.  The  idea  was  origi¬ 
nated  by  Mr.  Coe,  who  recalled  to  the  hesitating  members  the  famous 
saying,  “ If  wre  don’t  all  hang  together  now  wTe  shall  hang  separately  later.” 
A  meeting  of  the  Clearing  House  Association  was  held  on  September  20tli 
and  authorized  the  issue  of  $10,000,000  of  certificates.  These  not  being 
found  sufficient,  it  convened  again  on  the  31st  and  issued  $10,000,000 
more,  which  amount  was  afterward  increased  so  as  to  make  the  entire  issue 
amount  to  $26,565,000.  This  example  was  followed  in  all  the  leading 
cities  of  the  country,  and  was,  preeminently,  the  means  of  allaying  the 
panic  and  preventing  a  more  widespread  disaster. 

During  the  panic  of  1884,  marked  by  the  failure  of  Grant  &  Ward,  the 
Marine  Bank,  and  the  Metropolitan  Bank,  the  Clearing  House  issued  certif¬ 
icates  for  $24,915,000.  In  1890,  the  time  of  the  Baring  failure,  certificates 
to  the  amount  of  $16,645,000  were  issued.  The  panic  of  1893  required  a 
much  larger  issue,  certificates  for  $41,490,000  being  put  out.  This  was 
the  most  recent  issue  of  Clearing  House  certificates,  the  money  troubles  of 
1895  and  1896  ending  without  recourse  to  their  aid. 

A  new  policy  was  adopted  by  the  banks  in  1899  and  1901,  that  of 
making  up  a  pool  of  money  to  be  lent  under  direction  of  the  bank  officials 
by  one  broker  in  the  Loan  Crowrd  of  the  Stock  Exchange.  The  details 
of  these  poolings  are  here  given  through  the  kindness  of  Mr.  Samuel 
Wolverton,  president  of  the  Gallatin  National  Bank. 


THE  MONEY  POOLS  OF  1889  AND  1901 

A  period  of  stringency  extended  throughout  the  fall  of  1899.  On 
Monday,  December  18th,  about  noon,  money  reached  fifty  per  cent.,  and 
about  2  o’clock  it  reached  100  per  cent.,  none  being  in  sight. 

A  meeting  of  the  bank  officials  was  called  at  the  Clearing  House,  and  a 
cash  pool  of  $6,000,000  or  $7,000,000  was  formed.  This  was  placed  in 
Mr.  Frothingham,  the  loan  specialist’s,  hands  to  lend  at  the  market,  under 
the  direction  of  Mr.  F.  D.  Tappen.  Before  this  money  reached  the  Exchange, 
rates  had  advanced  to  186  per  cent.,  but  prompt  action  in  throwing  it  on 
the  market  in  large  amounts  forced  the  quotation  down  to  six  per  cent. 

The  next  morning  another  meeting  of  the  bank  officials  was  held,  and  a 
pool  of  $11,000,000  was  formed.  This  was  given  out  in  amounts  of  from 
$500,000  to  $1,000,000,  to  lend  at  the  market.  First  loans  w^ere  made  at 
thirty  per  cent.,  and  were  followed  by  others  at  twrenty-five  and  twenty,  and 
so  on  dowm,  until,  before  noon,  the  rate  dropped  to  six  per  cent.,  and  one- 
half  of  the  pool  money  was  still  in  the  hands  of  the  banks. 


THE  LOAN  MARKET 


453 


On  May  9,  1901,  the  Northern  Pacific  corner  brought  about  an  acute 
condition  in  the  money  market.  A  number  of  the  larger  banks,  and  the 
banking  house  of  J.  P.  Morgan  &  Co.,  collected  a  pool  of  $19,500,000.  This 
was  given  out  to  the  loan  specialist,  who  lent  it  at  the  Exchange  at  forty, 
fifty,  and  lastly  at  sixty  per  cent.  On  previous  occasions  the  policy  of 
concentration  had  broken  the  rate  to  six  per  cent.  Why  it  did  not  succeed 
was  not  explained  until  the  following  day,  when  the  large  credit  balance  of 
the  Stock  Exchange  houses  at  the  banks  showed  that  they  had  borrowed 
all  the  money  available,  without  regard  to  their  needs.  Money  was  freely 
loaned  on  the  succeeding  days,  but  no  concerted  action  was  necessary.  In 
December,  1902,  a  vague  feeling  of  unrest  pervaded  the  money  market;  the 
usual  fear  which  possesses  borrowers  at  the  end  of  the  year  seemed  to  be 
intensified  and  ready  to  make  itself  felt  in  the  shape  of  high  rates.  On  the 
15th  the  market  opened  with  ten  per  cent,  bid,  and  very  little  offered,  and 
borrowers  were  becoming  more  and  more  apprehensive,  when  at  noon  it 
was  announced  that  J.  P.  Morgan  &  Co.,  James  Stillman,  and  George  F. 
Baker  had  formed  a  pool  of  $50,000,000,  to  be  loaned  at  the  market  rate, 
if  such  action  should  become  necessary,  the  subscribers  to  the  fund  being 
Messrs.  J.  P.  Morgan  &  Co.  and  the  principal  associated  New  York  banks. 
The  extreme  tension  thereupon  relaxed  almost  immediately,  and  call  loans 
fell  to  six  per  cent.,  closing  at  four.  No  money  was  loaned  by  the  pool  that 
day,  and  in  fact  none  was  ever  lent  by  it ;  not  a  dollar  was  added  to  the 
amount  already  in  the  Street,  and  no  funds  were  brought  in  from  the  out¬ 
side.  It  was  merely  a  notice  that  adequate  preparation  had  been  made  to 
prevent  any  disturbance  in  the  money  market  by  the  collection  of  a  large 
fund  which  could  be  used,  rapidly  and  effectively,  if  the  emergency  arose — 
another  proof  of  the  value  of  concentration  and  of  the  large  part  which 
sentiment  plays  in  the  affairs  of  Wall  Street.  The  policy  advocated  by 
James  Gallatin  in  1857,  which  was  continued  by  his  successor,  Frederick  D. 
Tappen,  through  the  Clearing  House  certificates,  and  after  by  the  asso¬ 
ciated  bank  pools,  has  come  down  to  the  present  time;  wide-reaching 
through  the  growth  of  business,  and  fortified  by  experience,  it  still  fulfills 
its  mission  of  a  very  present  help  in  time  of  trouble. 

A  subject  which  begins  at  the  foundation  of  all  speculative  enterprise, 
which  touches  so  many  points  of  business  interest,  and  is  acted  upon  by 
such  a  variety  of  forces,  produces  an  embarrassing  number  of  items  for 
consideration.  It  can  only  be  said  that  a  choice  among  them  had  to  be 
made,  and  like  a  discretionary  board  order  the  commission  to  treat  of  the 
nature  and  history  of  the  Loan  Market  has  been  executed  to  the  best  of  the 
writer’s  ability. 

In  1903  the  New  lTork  City  banks  have  increased  from  twenty- two  in 
1837,  to  fifty-seven,  from  a  capital  of  $18,000,000  to  over  $108,000,000, 


454 


THE  NEW  YORK  STOCK  EXCHANGE 


and  a  surplus  of  $124,000,000;  the  specie  has  increased  from  $1,700,000 
to  $159,000,000 ;  the  circulation  from  $5,000,000  to  $43,000,000 ;  the 
deposits  of  $15,000,000  have  risen  to  $884,000,000,  and  the  loans  and 
discounts  from  $38,000,000  to  $902,000,000.  The  trust  companies  show 
resources  of  over  $1,000,000,000 ;  capital,  $53,000,000 ;  surplus,  $70,000,- 
000;  deposits,  $880,000,000;  loans  on  call,  $600,000,000.  Transactions  on 
the  Stock  Exchange  have  enlarged  from  5,000  to  10,000  shares  a  day,  and 
now  range  from  500,000  to  over  1,000,000,  while  the  number  of  stocks 
traded  in  has  increased  from  35  to  more  than  200.  The  Stock  Exchange 
now  does  in  one  big  day  the  year’s  work  of  1837,  and  business  has  multi¬ 
plied  a  hundredfold.  In  looking  at  these  figures  the  question  naturally 
arises,  whether  capital  has  increased  in  the  same  proportion  as  business ;  in 
other  words,  is  there  money  enough  to  do  the  work  comfortably  without 
fear  of  sudden  and  violent  changes  in  lending  rates,  or  shall  we  have  the  same 
troubles  in  the  future  as  in  the  past?  Among  favorable  factors  which 
make  for  ease  and  steadiness  are  the  Loan  Market  in  the  Stock  Exchange, 
the  concentration  of  capital  in  fewer  hands  by  the  merging  of  banks  and 
also  of  trust  companies,  and  the  policy  of  cooperation  by  uniting  the 
loanable  funds,  either  through  the  Clearing  House,  or  by  a  bank  pool  under 
the  charge  of  one  man,  and  lent  by  the  specialist  in  the  Exchange.  The 
improved  facilities  for  borrowing  abroad  must  also  not  be  forgotten.  On 
the  other  side  is  a  monetary  system  which  is  antiquated  and  inelastic, 
based  upon  debts  instead  of  assets,  and  which  makes  no  provision  for 
expanding,  but  limits  contraction  by  statute,  affording  every  facility  for 
getting  into  trouble  and  no  means  of  getting  out.  In  addition  are  the 
stupid  Sub-Treasury  laws  and  the  doubtful  hope  of  relief  from  what  is 
called  the  wisdom  of  Congress — a  wisdom  in  financial  affairs  so  attenuated 
that  no  figure  of  speech  will  express  it. 

A  comparison  of  the  rates  for  money  in  the  New  York  market  with 
those  of  London,  Paris,  or  Berlin  would  seem  sufficient  evidence  of  the 
necessity  of  some  change  in  our  system  of  finance  to  place  it  more  in  accord 
with  modern  and  enlightened  methods.  This  can  come  about  only  by 
action  of  Congress,  and  when  currency  reform  and  political  success  shall  go 
hand-in-hand  we  may  expect  some  remedial  legislation.  In  the  meantime 
the  campaign  of  financial  education  will  have  to  be  fought  out.  For  this 
important  work  no  more  efficient  and  influential  leaders  can  be  found  than 
those  men  whose  broad  views  and  courageous  actions  have  often  been 
reflected  in  the  movements  of  the  Loan  Market. 


VII 


THE  UNLISTED  SECURITY  MARKET 


By 


HENRY  I.  JIJDSON 


. 


YI1 

THE  UNLISTED  SECURITY  MARKET 

BY 

HENRY  I.  JUDSON 

E  market  for  what  are  called  “unlisted ”  securities — that 
is,  securities  for  which  application  to  list  on  the  Stock 
Exchange  has  not  been  made — first  assumed  considerable 
proportions  about  the  latter  part  of  1881,  during  the  boom 
in  prices  after  the  resumption  of  specie  payments  in  1879. 
Securities  that  had  long  been  deemed  worthless,  and  had  been 
hidden  away,  suddenly  became  of  value,  and  a  market  for  them  was  made 
in  New  Street,  adjacent  to  the  Stock  Exchange.  Another  feature  of  the 
“outside”  market  was  that  of  dealing  in  the  securities  of  new  enterprises 
before  they  were  ready  to  be  regularly  listed  on  the  Exchange,  the  dealings 
being  made  either  in  what  were  called  “subscriptions,”  or  in  the  bonds  and 
stocks  to  be  delivered  “when  issued.”  All  this  developed  into  a  market  of 
considerable  volume. 

The  brokers  who  made  a  specialty  of  dealing  on  the  “outside,”  first 
carried  on  the  business  in  New  or  Broad  street,  adjacent  to  the  Exchange ; 
but  the  inconvenience  of  being  without  shelter  from  the  cold  and  inclemency 
of  the  storms  in  winter,  and  from  the  heat  of  summer,  led  them  to  rent  a 
building  on  New  Street,  and  with  a  very  limited  organization  as  to  rules, 
and  new  members  to  carry  on  the  business  there,  having  a  “call,”  and  a 
printed  list  showing  prices  and  sales.  Later,  this  organization  of  the 
“outside”  brokers  was  absorbed  by  the  Mining  Exchange,  the  principal 
business  of  this  Exchange  being  in  petroleum  and  mining  stocks.  At  the 
time  of  this  consolidation  of  the  “  outside  ”  brokers  with  the  Mining  Board, 
stocks  listed  on  the  New  York  Stock  Exchange  were  not  there  dealt  in,  and 
a  large  number  of  the  members  of  the  New  York  Stock  Exchange  were 
members  of  the  smaller  Exchange,  the  relationship  of  the  two  boards  being 


458 


THE  NEW  YORK  STOCK  EXCHANGE 


friendly ;  but  when  the  Mining  Exchange  determined  to  permit  dealings  in 
stocks  regularly  listed  on  the  older  Exchange,  the  friendly  relationship 
ceased,  and  the  members  of  the  New  York  Stock  Exchange  who  held  seats 
on  the  Mining  Board  were  compelled  to  dispose  of  them.  A  department  for 
dealing  in  unlisted  securities  was  then  at  once  opened  by  the  New  York 
Stock  Exchange,  in  what  was  known  as  the  Long  Room,  and,  as  most  of  the 
orders  executed  hitherto  in  the  Mining  Exchange  had  come  from  the  Stock 
Exchange  houses,  it  was  not  difficult  to  transfer  the  work.  The  writer  of 
this  article,  who  had  made  a  specialty  of  dealing  in  “  outside  ”  securities,  and 
was  most  familiar  with  the  work,  purchased  a  membership  of  the  older 
Board  at  this  time,  and  continued  to  make  the  dealing  in  unlisted  securities 
his  specialty.  Mr.  W.  H.  Burger  was  his  partner  at  the  time,  though  he  did 
not  buy  a  seat  until  later.  At  first  the  volume  of  orders  in  the  depart¬ 
ment  was  not  large,  but  the  placing  of  the  stocks  of  the  American  Sugar 
Company,  the  National  Lead  Company,  and,  later  on,  the  stocks  of  the 
United  States  Leather  Company,  in  the  unlisted  department,  gave  to  the 
department,  which  has  since  grown  to  large  proportions,  the  impetus  it 
needed.  The  house  of  C.  I.  Hudson  &  Co.  also  made  the  dealing  in  unlisted 
securities  a  prominent  feature  of  their  business.  Following  these  pioneers, 
many  important  houses  have  since  become  identified  with  this  class  of 
brokerage.  The  flood  of  new  securities  which  has  come  upon  the  market 
within  the  past  few  years,  by  the  consolidation  of  mercantile  and  manu¬ 
facturing  establishments,  has  caused  the  Stock  Exchange  to  be  more  care¬ 
ful  as  to  what  is  admitted  to  its  list,  with  the  result  that  the  market  for 
the  overflow  has  gone  back  to  the  Street,  and  makes  what  is  now  known  as 
the  market  on  the  “  Curb.” 


VIII 


MUNICIPAL  BONDS 


By 


WILLIAM  F.  G.  SHANKS 


VIII 

MUNICIPAL  BONDS 


BY 

WILLIAM  F.  G.  SHANKS 

T  has  been  said  by  some  one  that  “Next  to  Government  are 
Municipal  bonds.”  He  doubtless  meant  it  in  the  sense  of 
security  as  an  investment  and  not  with  any  reference  to  the 
volume  of  Municipals  in  the  hands  of  permanent  investors, 
for  unfortunately  statistics  are  not  very  full  or  clear  on  this 
latter  point.  The  Government  reports  as  to  national  bank 
resources  do  not  separate  Municipal  bonds  from  other  classes ;  and  with 
regard  to  the  holding’s  of  savings  banks,  the  Comptroller  of  the  Currency 
includes  State,  County,  City,  Town,  Village,  and  School  District  bonds,  which 
are  usually  regarded  and  understood  to  be  meant  by  Municipal  bonds, 
under  the  enumeration  of  “  State  and  other  stocks  and  bonds.”  And  this, 
of  course,  means  only  bonds,  though  some  cities,  like  New  York,  for  instance, 
issue  long  term  bonds  under  the  title  of  “Corporate  Stock.”  “Municipal 
bonds”  are  generally  considered  among  dealers  to  include  State,  County, 
City,  Town,  Township,  Village,  and  School  District  bonds  for  whatever 
purpose  (road,  bridge,  water,  etc.),  and  are  so  treated  in  this  article. 

Their  security  and  not  their  volume  was  doubtless  alluded  to  in  the 
above  comparative  statement,  in  view  of  the  fact  that  not  only  the  State 
but  the  National  courts  protect  the  investor  in  them.  This  may  be  said  of 
other  issues  of  bonds,  but  the  decisions  of  the  United  States  Circuit  Courts 
regarding  Municipals,  overruling  local  and  State  court  decisions,  have  been 
so  numerous  and  so  uniformly  sustained,  when  appealed,  by  the  United 
States  Supreme  Court,  that  the  law  with  regard  to  them  is  generally 
regarded  by  investors  as  firmly  settled.  The  litigation  thus  happily  result¬ 
ing  grew  largely  out  of  disputes  over  the  liability  for  bonds  of  States  which 
had  seceded  and  formed  the  Southern  Confederacy,  and  of  the  liability  of 


462 


THE  NEW  YORK  STOCK  EXCHANGE 


numerous  minor  divisions  of  States  of  other  sections  of  the  Union,  for 
bonds  issued  in  aid  of  railroads  which  were  never  built,  although  the  bonds 
to  pay  for  them  were  sold  to  confiding  and  innocent  purchasers.  So  uni¬ 
formly  favorable  to  bondholders  have  been  these  decisions  that  such 
litigation  has  almost  entirely  ceased,  and  the  bonds  in  dispute  have  either 
been  paid  or  compromised  and  settled.  In  brief,  the  law  is  so  generally 
regarded  as  settled  that  litigation  has  practically  terminated.  A  re¬ 
markable  instance  of  ready  acquiescence  in  this  construction  of  liability  was 
witnessed  in  the  State  of  Ohio  in  1902.  A  large  amount  (in  the  aggregate) 
of  Municipal  bonds  had  been  issued  and  sold  by  cities  and  counties  under 
special  acts  of  the  several  Legislatures  for  about  ten  years  prior  to  the 
raising  of  the  point  of  liability.  The  Supreme  Court  of  the  State  decided  in  a 
case  against  the  City  of  Cleveland,  that  its  bonds  in  question  should  have 
been  issued  under  the  general  law  of  the  State,  instead  of  a  special  enact¬ 
ment.  Whereupon  an  extra  session  of  the  Legislature  was  called ;  remedial 
legislation  was  enacted ;  payment  of  interest  went  on  regularly ;  no  investor 
felt  for  a  moment  in  doubt  as  to  the  validity  of  his  holdings  or  the  good 
faith  of  the  debtor  municipality,  and  the  matter  naturally  adjusted  itself. 
A  still  more  curious  illustration  was  seen,  almost  simultaneously,  in  one 
of  the  territories,  in  which  one  of  the  counties  contested  its  liability  for 
bonds  it  had  authorized  in  aid  of  a  railroad  which  never  progressed  farther 
than  to  assume  a  corporate  name  and  sell  the  county  bonds  it  had  received 
as  aid.  But  in  this  case  the  Territory  (Arizona)  was  authorized  by  Congress 
to  issue  its  own  bonds  in  lieu  of  the  obligations  of  the  County  (Pima),  and 
the  whole  difficulty  was  adjusted.  No  holder  of  the  original  County  bonds 
doubts  that  the  substituted  Territorial  bonds  will  be  paid  as  they  mature, 
or  fears  that  they  will  not  be  assumed  by  the  State  which  may  succeed, 
since  the  power  which  admits  States  and  the  Supreme  Court  which  construes 
constitutional  law  for  all  alike  will  regulate  that.  It  is  these  and  like 
decisions  of  the  courts  which  make  Municipal  bonds  second  to  Government 
in  the  estimation  of  permanent  investors ;  and,  of  course,  the  fact  that  they 
are  not  subject  to  sudden  and  violent  fluctuations. 

As  I  have  before  explained,  trustworthy  statistics  as  to  the  volume  of 
Municipal  bonds  outstanding  are  difficult  of  compilation.  The  national 
banks  hold  many,  but  they  are  not  separately  enumerated  from  other 
securities.  The  savings  banks  hold  a  greater  amount,  but  even  these  can 
be  only  approximately  estimated.  The  latest  report  of  the  Comptroller  of  the 
Currency,  to  be  found  in  the  Statistical  Abstract  from  the  Treasury  Depart¬ 
ment  for  the  fiscal  year  1901-1902  (June  30th),  gives  the  total  resources 
of  the  1,036  savings  banks  at  $2,893,172,986.  Of  this  total  about  80  per 
cent,  is  held  in  the  Atlantic  coast  States  north  of  the  District  of  Columbia, 
where  reside  5,782,049  depositors.  Naturally  the  principal  investment  of 


MUNICIPAL  BONDS 


463 


these  trust  funds  in  all  sections  is  in  real  estate  bonds  and  mortgages, 
which  pay  a  better  return  than  any  other  class  of  investments.  Investments 
in  Governments  are  limited,  owing  to  the  small  return  their  higher  value 
yields.  The  next  largest  investment  is  in  municipal  bonds,  the  great 
majority  of  which  (though  not  all)  return  a  larger  per  cent,  than  the 
savings  banks  pay  to  their  depositors.  The  total  investment  in  Munici¬ 
pals,  according  to  the  authority  above  quoted,  was  $481,568,530.  The 
investments  of  the  same  banks  in  railroad  bonds  were  $375,623,513 ;  but 
it  should  be  remembered  that  the  restrictions  of  the  States  holding  the 
largest  amount  of  trust  funds  are  very  severe  in  this  respect. 

These  figures  can  be  regarded  only  in  a  comparative  sense;  there  is 
no  way  of  arriving  at  the  amount  of  municipal  bonds  held  by  individual 
investors,  for  few  issues  are  registered  and  the  coupons  are  paid  either  by 
check  or  through  fiscal  agents ;  but  the  aggregate  held  by  individuals  must 
largely  exceed  the  total  found  in  institutions  subject  to  National  or  State 
examinations. 

One  reason  for  this  conclusion  is  found  in  the  great  growth  of  the  out¬ 
put  of  municipal  bonds.  Prior  to  1896  no  trustworthy  reports  of  sales 
were  kept ;  and  since  then  only  newspapers  making  a  specialty  of  reporting 
municipal  bond  sales  have  made  a  business  of  such  compilation.  The  two 
principal  journals  on  which  dealers  rely,  the  Commercial  Chronicle  (weekly), 
and  The  Bond  Buyer  (daily  and  weekly),  differ  somewhat  in  their  methods, 
but  both  arrive  at  practically  the  same  result.  One  treats  temporary  loans 
or  notes  and  revenue  bonds  (in  anticipation  of  taxes)  as  bonds,  in  calculat¬ 
ing  the  amount  invested;  the  other  keeps  long  and  short  term  bonds 
separately ;  but  the  two  practically  agree  as  to  the  annual  output  of  this 
class  of  securities.  Accepting  the  figures  of  The  Bond  Buyer,  as  less  compli¬ 
cated,  we  find  that  since  it  began  systematically  to  compile  its  table  the 
output  has  been  as  follows : 

MUNICIPAL  BOND  SALES  BY  YEARS. 


Year.  Issue.  Amount. 

1896,  1283  $129,538,415 

1897,  .  2024  163,352,254 

1898,  .  2199  128,015,728 

1899,  .  2684  144,403,454 

1900,  .  2312  174,578,040 

1901 .  2584  168,172,783 

1902, .  2804  206,473,052 


The  fact  that  here  are  records  of  issues  of  nearly  three  times  the  total 
amount  now  held  by  banks  is  another  evidence  that  a  vast  majority  in 
amount  goes  almost  directly  into  the  hands  of  individual  investors  and 
executors  of  estates.  Another  proof  lies  in  the  large  increase  in  the  number 


464 


THE  NEW  YOKK  STOCK  EXCHANGE 


of  firms  making  a  specialty  of  dealing  in  this  class  of  bonds.  Ten  years 
ago  the  number  was  hardly  over  twenty ;  it  now  exceeds  two  hundred ;  and 
numerous  national  banks,  trust  companies,  and  general  bankers  and 
brokers  have  added  municipal  bond  departments  to  their  regular  business. 
At  the  same  time  those  firms  previously  confining  their  efforts  to  buying 
and  selling  Municipals  have  begun  to  deal  in  railroad,  street  railway,  and 
miscellaneous  or  industrial  securities,  incited  thereto  by  the  fact  that  rail¬ 
road  and  street  railway  bonds  have  been  made  by  law  legal  investments 
for  their  old  customers,  the  savings  banks.  Many  of  these  Municipal  houses 
have  also  bought  seats  on  the  various  Stock  Exchanges  of  the  principal 
money  centres.  In  fact  there  is  going  on  a  curious  evolution  in  this  business, 
which  it  is  only  possible  just  now  to  suggest — hardly  to  indicate  by  data 
other  than  the  above. 


IX 


ANNALS  AND  STATISTICS 


By 


MILTON  J.  PLATT 


IX 

ANNALS  AND  STATISTICS 

BY 

MILTON  J.  PLATT 


SECTION  ONE 


PERSONAL  AND  BUSINESS  ANNALS 


T  seems  eminently  fitting  that  to  a  History  of  the  New  York 
Stock  Exchange  should  be  affixed,  as  a  matter  of  permanent 
interest,  a  selection  from  the  more  important  annals  of  the 
Exchange,  relating  to  its  executive  control,  its  membership, 
and  the  volume  of  its  transactions.  Fortunately,  the  records 
make  it  possible  to  exhibit  an  unbroken  succession  of  the 
officers,  under  whose  management — distinguished  on  the  whole  for  efficiency, 
fidelity,  and  wise  foresight— the  Exchange  has  grown  from  the  nucleus 
formed  when  the  constitution  was  adopted  in  1817  to  its  power,  at  the 
opening  of  the  twentieth  century,  in  wealth  and  members,  and  to  its 
influence  upon  the  condition  of  the  nation  and  the  finances  of  the  civilized 
world. 


I 


OFFICERS  OF  THE  NEW  YORK  STOCK  EXCHANGE,  1817-1904 


Presidents 


Vice-Presidents  Secretaries 


1817  A.  Stockholm, 

1818  G.  S.  Mumford, 

1819 

1820  “ 

1821  “ 

1822  “ 

1823  “ 


1824  Edward  Lyde, 

1825  “ 

1826  “ 


1827  James  W.  Bleecker, 

1828  “ 

1829 


Isaac  G.  Ogden, 


John  Ward, 


John  Benson, 

if 

Cl 

cc 
c  c 
cc 
cc 

Jacob  Isaacs, 

if 

CC 

if 

if 


Treasurers 


cc 


468 


THE  NEW  YORK  STOCK  EXCHANGE 


Presidents 

1830  Russell  H.  Nevins, 

1831  John  Ward, 

1832 

1833 

1834  R.  D.  Weeks, 

1835  Edward  Prime, 

1836  R.  D.  Weeks, 

1837  David  Clarkson, 

1838 

1839  “ 

1840  “ 

1841 

1842 

1843 

1844 

1845 

1846 

1847 

1848 

1849 

1850 

1851  H.  G.  Stebbins, 

1852  C.  R.  Marvin, 

1853 

1854 

1855 

1856 

1857  John  H.  Gourlie, 

1858  H.  G.  Stebbins, 

1859  W.  H.  Neilson, 

1860 

1861  W.  R.  Yermilye, 

1862  A.  B.  Baylis, 

1863  H.  G.  Stebbins, 

1864  W.  Seymour,  Jr. 

1865  R.  L.  Cutting, 

1866  Wm.  Alex.  Smith, 

1867  John  Warren, 

1868  William  Searls, 

1869  W.  H.  Neilson, 

1870  W.  Seymour,  Jr., 

1871  W.  B.  Clerke, 

1872  Edward  King, 

1873  H.  G.  Chapman, 

1874  Geo.  H.  Brodhead, 

1875  Geo.  W.  McLean, 

1876  Salem  T.  Russell, 

1877  Henry  Meigs, 

1878  Brayton  Ives, 

1879 

1880  Donald  Mackey, 

1881 

1882  F.  N.  Lawrence, 

1883  A.  S.  Hatch, 

1884  J.  E.  Simmons, 

1885 

1886  James  D.  Smith, 


Vice-Presidents 
John  Ward, 
Walter  Bicker, 

i  t 

R.  D.  Weeks, 
Edward  Prime, 

R.  L.  Nevins, 

H.  G.  Stebbins, 

D.  H.  Nevins, 

R.  H.  Winslow, 

(  i 
t  < 

H.  G.  Stebbins, 

W.  H.  Brown, 
Edward  Prime, 

R.  H.  Winslow, 

H.  G.  Stebbins, 

it) 

W.  H.  Brown, 

C.  Christmas, 

t  i 
tt 

B.  Nathan, 

H.  M.  Benedict, 
M.  A.  Wheelock, 

t  < 

{  t 
t  i 
i  i 
tt 
a 

i  t 
<  t 
t  i 
cc 

it 
tt 
a 
tt 
t  c 

J.  L.  Brownell, 

it 
C  i 

Geo.  H.  Brodhead, 
J.  B.  Norris, 

i  t 

Brayton  Ives, 

(  t 

C.  M.  Stead, 

t  i 
it 
it 

F.  N.  Lawrence, 

F.  K.  Sturgis, 
Henry  Graves, 
Wm.  Lummis, 
James  D.  Smith, 
Rudolph  Keppler, 


Secretaries 
Jacob  Isaacs, 
Bernard  Hart, 

it 
it 
t  C 
i  i 
t  e 
a 
i  c 
1 1 
a 
tt 
tt 

a 

tt 
tt 
1 1 
1 1 
tt 
1 1 
tt 
tt, 
a 

tt 
1 1 

Geo.  II.  Brodhead, 

tt 

i  i 
i  6 
i  t 
i  t 
tt 
i  t 
it 
tt 
tt 
tt, 
tt 
tt 
1 1 

B.  O.  White, 

tt, 

tt 

tt 

it 

it 

t  r 
tt 
tt 
tt 
tt 
tt 
it 

George  W.  Ely, 

tt 

tt 

tt 


Treasurers 


J.  W.  Bleecker, 
1 1 

John  Ward, 

J.  W.  Bleecker, 


LeGrand  Lockwood, 
Wm.  Alex.  Smith, 


D.  C. 


Hays, 


ANNALS  AND  STATISTICS 


469 


Presidents 

Vice-Presidents 

Secretaries 

Treasurers 

1887  James  D.  Smith, 

R.  H.  Thomas, 

George  W.  Ely, 

D.  C.  Hays 

1888  W.  L.  Bull, 

H.  J.  Morse, 

<  < 

<  C 

1889 

<  < 

<  ( 

i  < 

1890  W.  B.  Dickerman, 

John  Hone,  Jr., 

it 

i  < 

1891 

<  ( 

(  C 

<  6 

1892  F.  K.  Sturgis, 

Francis  L.  Eames, 

i  i 

(  C 

1893 

R.  H.  Thomas, 

it 

c  i 

1894  Francis  L.  Eames, 

i  i 

ii 

<  < 

1895 

l  C 

<  <; 

F.  W.  Gilley 

1896 

(  c 

i  c 

C  i 

1897 

c  ( 

<  < 

i  c 

1898  Rudolph  Keppler, 

i  c 

a 

( ( 

1899 

( i 

a 

i  c 

1900 

J.  T.  Atterbury, 

Wm.  McClure, 

i  l 

1901 

II.  K.  Pomroy, 

i  i 

<  ( 

1902 

i  C 

i  C 

C  ( 

1903  Ransom  H.  Thomas, 

a 

i  t 

(( 

1904  H.  K.  Pomroy, 

C.  W.  Maury, 

a 

it 

II 

EARLY  MEMBERS  OF  THE  EXCHANGE  STILL  ON  THE  ROLLS  IN  APRIL,  1903 

HEN  the  Stock  Exchange  was  about  to  take  possession  of  its  new  edifice,  an  inter¬ 
esting  list  was  compiled  of  members  still  surviving,  and  holding  their  seats, 
whose  membership  dated  at  least  from  May,  1869,  the  month  when  a  consolida¬ 
tion  was  effected  by  admitting  the  members  of  the  Government  Bond  Board  and  those  of  the 
Open  Board  of  Brokers  to  membership  in  the  New  York  Stock  Exchange.  The  facts  con¬ 
nected  with  that  consolidation  are  given  in  the  main  History  preceding. 

In  May,  1869,  the  roll  of  members  of  the  old  or  “Regular”  Board  was  found  to  contain 
533  names.  Of  this  number  the  fifty -seven  names  following  were  of  those  who  still  retained 
membership  in  April,  1903.  The  respective  dates  of  their  admission  are  appended : 


Wm.  Alex  Smith, 

Dec. 

17, 

1844 

Donald  Mackay, 

Feb. 

17, 

1866 

Jas.  B.  Colgate, 

Sept. 

27, 

1853 

Clarence  S.  Day, 

Mar. 

5, 

6  i 

L.  J.  Yan  Boskerck, 

Dec. 

14, 

1854 

A.  I.  Ormsbee, 

Mar. 

24, 

<  i 

J.  H.  Whitehouse, 

Nov. 

20, 

1857 

F.  L.  Eames, 

May 

2, 

C  C 

L.  D.  Huntington, 

March  6, 

1858 

Wm.  Carpender, 

May 

3, 

t  i 

Thomas  Denny, 

Aug. 

10, 

1860 

Jacob  Hays, 

May 

8, 

<  c 

C.  L.  Cammann, 

Aug. 

16, 

i  < 

Wm.  Weeber, 

Aug. 

8, 

(  c 

A.  S.  Clark, 

Sept. 

5, 

<  C 

D.  Henry  Smith, 

Sept. 

7, 

i  i 

E.  Corning, 

Oct. 

6, 

i  V 

W.  T.  Colbron, 

Dec. 

8, 

<  < 

A.  M.  Cahoone, 

May 

10, 

1862 

J.  D.  Slayback, 

Dec. 

10, 

<  < 

E.  F.  Patehen, 

Jan. 

3, 

1863 

S.  J.  Drake, 

Feb. 

7, 

1867 

E.  C.  Benedict, 

June 

6, 

l  C 

G.  J.  Losea, 

June 

16, 

i  < 

J.  H.  Jacquelin, 

Aug. 

10, 

i  ( 

Henry  Graves, 

Aug. 

12, 

c  c 

Howard  Lapsley, 

Aug. 

17, 

i  t 

Wm.  McClure, 

Feb. 

29, 

1868 

H.  S.  Cambios, 

Sept. 

4, 

(  t 

T.  W.  Thorne, 

Mar. 

27, 

<  < 

H.  H.  Nathan, 

May 

18, 

1864 

J.  C.  Westervelt, 

Apr. 

22, 

<  i 

Henry  Clews, 

June 

27, 

a 

H.  S.  Germond, 

May 

26, 

it 

E.  S.  Connor, 

July 

6, 

i  < 

Charles  Gregory, 

June 

8, 

i  ( 

E.  H.  Bonner, 

July 

8, 

it 

W.  E.  Strong, 

June 

24, 

it 

H.  I.  Clark, 

Nov. 

16, 

l  c 

James  D.  Smith, 

July 

24, 

it 

H.  S.  Wilson, 

Dec. 

12, 

n 

Charles  H.  Leland, 

Dec. 

28, 

i  i 

470 

THE  NEW" 

YORK 

STOCK  EXCHANGE 

F.  W.  Gilley,  Jr., 

Dec. 

30, 

1864 

A.  H.  Combs, 

Jan. 

9, 

Joseph  Walker, 

Jan. 

11, 

1865 

F.  K.  Sturgis, 

Jan. 

12, 

H.  C.  Oakley, 

Jan. 

19, 

<  < 

James  McCormick, 

Jan. 

23, 

James  Weeks, 

Feb. 

28, 

<  < 

W.  G.  Read, 

Feb. 

26, 

Wm.  Cooper, 

Mar. 

11, 

<  < 

A.  M.  Judson, 

Feb. 

27, 

R.  S.  Grant, 

Dec. 

2, 

6  C 

W.  E.  Tillinghast, 

Mar. 

18, 

The  Government  Bond  Board  and  the  Open  Board  together  supplied  527  members,  in 
the  consolidation,  so  that  the  New  York  Stock  Exchange  thus  increased  its  membership 
to  1060,  afterward,  in  December,  1879,  enlarged  by  the  sale  of  forty  additional  seats  to  its 
present  full  quota  of  1100.  The  following  list  of  sixty  names  embraces  those  of  all  surviving 
brokers,  admitted  in  May,  1869,  from  the  two  prior  organizations,  who  retained  their  mem¬ 
bership  in  April,  1903.  As  before,  the  respective  dates  of  admission  are  appended : 


C.  J.  Lawrence, 

May 

3, 

1869 

M.  Burr,  Jr., 

May 

8, 

1869 

S.  T.  Russell, 

May 

3, 

<  < 

W.  B.  Lawrence, 

May 

8, 

<  < 

Alfred  Neilson, 

May 

3, 

i  < 

J.  E.  Mastin, 

May 

8, 

<  t 

L.  P.  Henop, 

May 

3, 

<  i 

L.  D.  Alexander, 

May 

8, 

<  i 

Charles  S.  Day, 

May 

3, 

l  C 

Robert  Colby, 

May 

8, 

<  ( 

B.  F.  Munroe, 

May 

3, 

i  < 

W.  G.  Wiley, 

May 

8, 

i  i 

C.  A.  Buttrick, 

May 

3, 

<  < 

P.  H.  Minis, 

May 

8, 

i  < 

L.  Cahn, 

May 

3, 

<  i 

H.  L.  Johnson, 

May 

8, 

l  < 

R.  P.  Lounsbery, 

May 

3, 

<  t 

W.  F.  Bishop, 

May 

8, 

i  < 

W.  B.  Wadsworth, 

May 

3, 

<  < 

A.  Wolff,  Jr., 

May 

8, 

<  < 

R,  K.  White, 

May 

3, 

C  t 

A.  Josephson, 

May 

8, 

i  i 

Wm.  Rasmus, 

May 

3, 

c  < 

S.  L.  Blood, 

May 

8, 

<  i 

E.  A.  De  Mauriac, 

May 

3, 

« i 

J.  M.  Amory, 

May 

8, 

<  t 

W.  L.  Bull, 

May 

3, 

C  i 

J.  S.  Bussing, 

May 

8, 

i  t 

Arnold  Leo, 

May 

3, 

i  < 

R.  J.  Kimball, 

May 

8, 

<  < 

C.  M.  Shott,  Jr., 

May 

3, 

C  i 

S.  M.  Schafer, 

May 

8, 

<  t 

Jas.  Seligman, 

May 

3, 

<  c 

E.  T.  Bogert, 

May 

8, 

<  6 

J.  R.  Maxwell, 

May 

3, 

<  i 

Brayton  Ives, 

May 

8, 

(  i 

G.  M.  Whitehouse, 

May 

3, 

i  i 

W.  B.  Lockwood, 

May 

8, 

<  « 

W.  H.  Duff, 

May 

3, 

<  6 

A.  H.  Vemam, 

May 

8, 

<  i 

H.  H.  Truman, 

May 

3, 

<  C 

R.  P.  Herrick, 

May 

8, 

<  i 

A.  J.  Hatch, 

May 

8, 

<  < 

Oswin  O’Brien, 

May 

8, 

<  < 

I.  B.  Newcombe, 

May 

8, 

<  C 

W.  B.  Sancton, 

May 

8, 

<  < 

H.  J.  Morse, 

May 

8, 

<  c 

W.  H.  Johnson, 

May 

8, 

<  < 

H.  H.  Hollister, 

May 

8, 

C  ( 

Davis  Johnson, 

May 

8, 

<  t 

D.  T.  Worden, 

May 

8, 

C  < 

Chas.  Minzesheimer, 

May 

8, 

<  < 

Geo.  F.  Cummings, 

May 

8, 

<  i 

E.  L.  Oppenheim, 

May 

8, 

<  c 

Q.  C.  De  Grove, 

May 

8, 

C  6 

J.  Y.  Bouvier, 

May 

8, 

(  l 

W.  B.  Dickerman, 

May 

8, 

i  c 

L.  G.  Fisher, 

May 

8, 

<  c 

A.  Libaire, 

May 

8, 

i  e 

James  Boyd. 

May 

8, 

l  ( 

SUMMARY 

Members  of  the  original  Board  still  holding  membership,  April,  1903 ....  54 

Members  of  the  Junior  Board .  60 


Members  of  the  Junior  Board .  60 

Total  number  of  consolidation  members . 114 


In  1905,  two  years  later  than  the  completion  and  first  occupancy  of  the  Stock 
Exchange’s  new  edifice,  the  management  of  the  Board  is  entrusted  to  the  following 
Government  Committee,  executive  officers,  and  Gratuity  Fund  trustees: 


ANNALS  AND  STATISTICS 


471 


OFFICERS 

OF  THE 

NEW  YORK  STOCK  EXCHANGE 
To  May,  1906. 


PRESIDENT 

H.  K.  POMROY 

VICE-PRESIDENT 

C.  W.  MAURY 

SECRETARY 

GEORGE  WT.  ELY 


ASSISTANT  SECRETARY 

CHAS.  L.  BURNHAM 

TREASURER 

F.  W.  GILLEY 

CHAIRMAN 

B.  G.  TALBERT 


GOVERNING  COMMITTEE 

PRESIDENT  AND  TREASURER 


Class  1.— To  Serve 

BROWN,  STEPHEN  H. 

GEDDES,  DONALD  G. 
GRANBERY,  W.  H. 


One  Year. 

HALSEY,  R.  T.  H. 
HAZARD,  CHARLES 
NOBLE,  H.  G.  S. 
POST,  GEO.  B.,  JR. 


Class  2.— To  Serve  Two  Years. 

BARUCH,  BERNARD  M.  HENRY,  HOWARD  H. 

DONALD,  W.  M.  JACOB,  LAWRENCE 

GROESBECK,  ERNEST  KEPPLER,  RUDOLPH 

LAWRENCE,  HENRY  C. 

Class  3. — To  Serve  Three  Years. 

BURR,  WINTHROP  DE  VEAU,  F.  C. 

CAHOONE,  A.  M.  DOREMUS,  R.  P. 

CHAUNCEY,  DANIEL  EAMES,  FRANCIS  L. 

GOODHART,  A.  E. 


Class  4.— To  Serve  Four  Years. 


ATTERBURY,  J.  T. 
COX,  E.  V.  D. 
HEATON,  W.  W. 


HOLLISTER,  WM.  H. 
JONES,  W.  STROTHER 
KELLEY,  AUSTIN  P. 
MABON,  J.  B. 


ROGERS,  EDWARD  L. 
STURGIS,  F.  K. 
THOMPSON,  W.  LEDYARD 


LAWRENCE,  W.  B. 
NEWCOMBE,  CHAS.  M. 
WALKER,  NORMAN  S.,  JR. 


MAURY,  C.  W. 
RODEWALD,  F.  L. 
THOMAS,  R.  H. 


ROBISON,  WILLIAM 
SWORDS,  H.  C. 
WILLIAMS,  BLAIR  S. 


STANDING  COMMITTEES 

Committee  of  Arrangements 

C.  W.  MAURY,  Chairman  R.  P.  DOREMUS,  Vice-Chairman 

BROWN,  STEPHEN  H.  CHAUNCEY,  DANY  NEWCOMBE,  C.  M. 

BURR,  WINTHROP  DE  VEAU,  F.  C. 


ATTERBURY,  J.  T. 
DONALD,  W.  M. 
EAMES,  FRANCIS  L. 
GILLEY,  F.  W. 
GOODHART,  A.  E. 


Committee  on  Admissions 
A.  M.  CAHOONE,  Chaii'man 
GROESBECK,  ERNEST 
HAZARD,  CHARLES 
HOLLISTER,  WM.  H. 
KEPPLER,  RUDOLPH 
LAWRENCE,  W.  B. 


ROBISON,  WM. 
RODEWALD,  F.  L. 
STURGIS,  F.  K. 
SWORDS,  H.  C. 


472 


THE  NEW  YORK  STOCK  EXCHANGE 


BURR,  WINTHROP 

Arbitration  Committee 

DANIEL  CHAUNCEY,  Chairman 
JACOB,  LAWRENCE 

POST,  GEO.  B.,  JR. 

GEDDES,  DONALD  G. 

JONES,  W.  STROTHER 

WALKER,  NORMAN  S.,  JR, 

HALSEY,  R.  T.  H. 

LAWRENCE,  H.  C. 

Clearing-House  Committee 

R.  P.  DOREMUS,  Chairman  CHARLES  HAZARD,  Vice-Chairman 

RODEWALD,  F.  L.  ROBISON,  WM. 

Committee  on  Commissions 
A.  E.  GOODHART,  Chairman 
LAWRENCE,  H.  C. 

MAURY,  C.  W.  POST,  GEO.  B.,  JR. 


GRANBERY,  W.  H. 


HENRY,  H.  H. 


HENRY,  H.  H. 


Committee  on  Constitution 
F.  C.  DE  VEAU,  Chairman 

JONES,  W.  STROTHER  WILLIAMS,  BI-AIR  S. 

KELLEY,  AUSTIN  P. 


W.  M.  DONALD, 

HALSEY,  R.  T.  H. 


Finance  Committee 
Chairman  AUSTIN  P.  KELLEY, 

ROGERS,  EDWARD  L. 

The  President  and  the  Treasurer 


Vice-Chairman 

THOMAS,  R.  H. 


EAMES,  FRANCIS  L. 


ATTERBURY,  J.  T. 


Committee  on  Insolvencies 
A.  M.  CAHOONE,  Chairman 

Law  Committee 
F.  K.  STURGIS,  Chairman 
EAMES,  FRANCIS  L. 
KEPPLER,  RUDOLPH 


GROESBECK,  ERNEST 


SWORDS,  H.  C. 


Committee  on  Securities 

W.  W.  HEATON,  Chairman  E.  V.  D.  COX,  Vice-Chairman 


BARUCH,  BERNARD  M. 


GROESBECK,  ERNEST 


GEDDES,  DONALD  G. 

Committee  on  Stock  List 
W.  H.  GRANBERY,  Chairman 
HEATON,  W.  W. 
MABON,  JAS.  B. 


THOMPSON,  W.  LEDYARD 


NOBLE,  H.  G.  S. 


Committee  on  Unlisted  Securities 
JAMES  B.  MABON,  Chairman 

BARUCH,  BERNARD  M.  NEWCOMBE,  CHAS.  M. 

Nominating  Committee  for  1906 

STUART-WORTLEY,  R.  M.  TURNER,  C.  W. 

TAILER,  JAMES  B. 

Trustees  of  Gratuity  Fund 
WILLIAM  ALEXANDER  SMITH,  Chairman  W.  L.  BULL,  Secretary  and  Treasurer 

WM.  ALEX.  SMITH,  FRANCIS  L.  EAMES,  S.  H.  KISSAM. 

W.  B.  DICKERMAN,  W.  L.  BULL, 


JAQUELIN,  H.  T.  B. 
KIP,  IRA  A.,  JR. 


The  President  and  the  Treasurer 


ANNALS  AND  STATISTICS 


473 


III 


TRANSFER  VALUATION  OF  A  STOCK  EXCHANGE  MEMBERSHIP,  1860-1904. 

From  A.  D.  1860  to  A.  D.  1867,  inclusive,  seats  upon  the  New  York  Stock  Exchange 
were  not  transferred  by  purchase  and  sale.  An  initiation  fee  of  $3,000,  however,  was 
required  from  members  duly  elected  by  the  Board,  and  in  business  on  their  own  account. 
Clerks  admitted  to  membership  within  these  years  paid  a  fee  of  $1,500  only. 

In  A.  D.  1868,  the  transfer  of  seats  began  to  have  a  market  valuation,  though  the 
seats  were  not  propei*ty  in  themselves.  The  following  table  gives  the  highest  and  lowest 
prices  at  which  memberships  passed  into  new  hands,  during  the  respective  years  from 
A.  D.  1868  to  A.  D.  1904,  also  subject  to  the  collection  of  an  initiation  fee  by  the  Ex¬ 
change  in  the  case  of  each  transfer : 


Year 

High 

Low 

Year 

High 

Low 

1868 . 

.  $8,000 

$7,000 

1887 . 

. $30,000 

$19,000 

1869 . 

.  7,500 

3,000 

1888 . 

.  24,000 

17,000 

1870 . 

.  4,500 

4,000 

1889 . 

.  23,000 

19,000 

1871 . 

.  4,500 

2,750 

IS  90 . 

.  22,500 

17,000 

1872 . 

.  6,000 

4,300 

1891 . 

.  24,000 

16,000 

1873 . 

.  7,700 

5,000 

1892 . 

.  22,000 

17,000 

1874 . 

.  5,000 

4,250 

1893 . 

.  20,000 

15,250 

1875 . 

.  6,750 

4,250 

1894 . 

. 21,250 

18,000 

1876 . 

.  5,600 

4,000 

1895 . 

.  20,000 

17,000 

1877 . 

.  5,750 

4,500 

1896 . 

.  20,000 

14,000 

1878 . 

.  9,500 

4,000 

1897 . 

.  22,000 

15,000 

1879 . 

. 16,000 

5,100 

1898 . 

.  29,750 

19,000 

1880 . 

.  26,000 

14,000 

1899 . 

.  40,000 

29,500 

1881 . 

.  30,000 

22,000 

1900 . 

.  47,500 

37,500 

1882 . 

.  32,500 

20,000 

1901 . 

.  80,000 

48,500 

1883 . 

.  30,000 

23,000 

1902 . 

. 81,000 

65,000 

1884 . 

.  27,000 

20,000 

1903 . 

.  82,000 

51,000 

1885 . 

.  34,000 

20,000 

1904 . 

. 81,000 

57,000 

1886 . 

.  33,000 

23,000 

IV 


TRANSACTIONS  ON  THE  NEW  YORK  STOCK  EXCHANGE,  1879-1903 


The  following  table  exhibits  the  remarkable  increase  of  the  volume  of  business  in  the 
Stock  Exchange  during  the  given  period  of  twenty-five  years.  The  financial  depression  of 
the  decade  1888-97,  at  its  lowest  in  1896,  interrupts  an  otherwise  progressive  expansion: 


Shares  of 

State  and 

Shares  of 

Stock 

Government 

Railroad 

Year 

Stock 

Unlisted 

Bonds 

Bonds 

1879 

72,765,762 

$114,060,000 

$457,246,534 

1880 

95,736,626 

58,922,350 

584,734,775 

1881 

117,078,167 

39,245,050 

447,055,150 

1882 

116,733,863 

18,178,850 

275,278,710 

1883 

97,937,599 

17,647,400 

296,245,556 

1884 

95,944,841 

15,295,700 

511,630,950 

1885 

92,987,303 

15,571,200 

666,270,542 

1886 

103,952,804 

13,367,100 

635,937,335 

1887 

85,821,027 

6,637,100 

366,966,250 

1888 

62,845,772 

2,822,844 

6,779,400 

346,501,402 

1889 

61,133,161 

10,889,435 

4,287,050 

394,151,466 

1890 

59,441,202 

11,969,498 

2,891,000 

376,052,120 

1891 

72,725,864 

1,539,900 

389,906,700 

State  and 
Railroad 
Bonds 
Unlisted 


474  THE  NEW  YORK  STOCK  EXCHANGE 


Shares  of 

Shares  of 
Stock 

Government 

State  and 
Railroad 

State  and 
Railroad 
Bonds 

Year 

Stock 

Unlisted 

Bonds 

Bonds 

Unlisted 

1892 

86,726,410 

1,662,400 

500,845,200 

1893 

77,984,965 

2,021,450 

299,372*327 

1894 

32,968,690 

16,307,046 

4,293,300 

350,260,200 

1895 

51,671,294 

14,769,282 

7,046,250 

495,904,950 

1896 

41,533,134 

12,957,509 

27,121,500 

358,815,850 

1897 

63,407,885 

14,549,660 

10,739,030 

530,909,500 

$3,485,000 

1898 

85,816,911 

27,649,472 

24,129,210 

847,654,000 

46,245,500 

1899 

120,622,492 

52,345,962 

10,458,230 

741,357,900 

16,356,500 

1900 

104,277,570 

34,710,814 

6,578,300 

542,165,100 

96,508,000 

1901 

209,373,224 

42,413,117 

1,785,210 

883,479,800 

32,119,182 

1902 

162,841,898 

23,763,310 

1,354,750 

861,543,700 

88,528,000 

1903 

137,408,568 

22,819,528 

1,197,850 

594,763,200 

SECTION  TWO 

GENERAL  STATISTICS 

A  somewhat  comprehensive  view  of  the  national  wealth  and  commercial 
greatness,  and  of  the  main  resources,  to  which  the  Stock  Exchange  owes  its 
rise  and  existence,  is  afforded  by  the  ensuing  tables : 

I 

NEW  YORK  CLEARING  HOUSE  COMPARISONS,  1860-1906 


No.  of  Balances  Paid  in  Money 


Year 

Banks 

‘Capital 

Clearings 

Total 

Daily  Average 

1860 

50 

$69,907,435 

$7,231,143,057 

$380,693,438 

$1,232,018 

1861 

50 

68,900,605 

5,915,742,758 

353,383,944 

1,151,088 

1862 

50 

68,375,820 

6,871,443,591 

415,530,351 

1,344,758 

1863 

50 

68,972,508 

14,867,597,849 

677,626,483 

2,207,252 

1864 

49 

68,586,763 

24,097,196,656 

885,719,205 

2,866,405 

1865 

55 

80,363,013 

26,032,384,342 

1,035,765,108 

3,373,825 

1866 

58 

82,370,200 

28,717,146,914 

1,066,135,106 

3,472,753 

1867 

58 

81,770,200 

28,675,159,472 

1,144,963,451 

3,717,414 

1868 

59 

82,270,200 

28,484.288,637 

1,125,455,237 

3,642.250 

1869 

59 

82,720,200 

37,407,028,987 

1,120,318,308 

3,637,397 

1870 

61 

83,620,200 

27,804,539,406 

1,036,484,822 

3,365,210 

1871 

62 

84,420,200 

29,300.986,682 

1,209,721,029 

3,927,666 

1872 

61 

84,420,200 

33,844,369,568 

1,428,582,707 

4,638,255 

1873 

59 

83,370,200 

35,461,052,826 

1,474,508,025 

4,818,654 

1874 

59 

81,635,200 

22,855,927,636 

1,286,753,176 

4,205,076 

1875 

59 

80,435,200 

25,061,237,902 

1,408,608,777 

4,603,297 

1876 

59 

81,731,200 

21,597.243,701 

1,295,042,029 

4,218,378 

1877 

58 

71,085,200 

23,289,274,247 

1,373,996,302 

4,504,906 

1878 

57 

63,611,500 

22,508,438,442 

1,307,843,857 

4,274,000 

1879 

59 

60,800,200 

25,178,770,691 

1,400,111,063 

4,560,622 

1880 

59 

60,475,200 

37,182,128,621 

1,516, '538,631 

4,956,009 

1881 

61 

61,162,700 

48,568,818,212 

1,776,018,162 

5,823,010 

1882 

62 

60,962,700 

46,552,846,161 

1,598,000,245 

5,195,440 

1883 

64 

61,162,700 

40,293,165,258 

1,568,983,196 

5,161,129 

1884 

67 

60,412,700 

34,092,037,238 

1,524,930,994 

4,967,202 

1885 

64 

58,612,700 

25,250,791,440 

1,295,355,252 

4,247,069 

1886 

64 

59,312,700 

33,374,682,216 

1,519,565,385 

4,965,900 

ANNALS  AND  STATISTICS 


475 


No.  of  Balances  Paid  in  Money 


Year 

Banks 

•Capital 

Clearings 

Total 

Daily  Average 

1887 

65 

$60,862,700 

34,872,848,786 

$1,569,626,325 

$5,146,316 

1888 

64 

60,762,700 

30,863,686,609 

1,570,198,528 

5,148,192 

1889 

64 

60,762,700 

34,796,465,529 

1,757,637,473 

5,800,784 

1890 

65 

60,812,700 

37,660,786,572 

1,753,040,145 

5,728,889 

1891 

64 

60,772,700 

34,053,698,770 

1,584,635,500 

5,195,526 

1892 

65 

60,422,700 

36,279,905,236 

1,861,500,575 

6,083,335 

1893 

65 

60,922,700 

34,421,380,870 

1,696,207,176 

5,616,580 

1894 

66 

61,622,700 

24,230,145,368 

1,585,241,634 

5,214,611 

1895 

67 

62,622,700 

28,264,379,126 

1,896,574,349 

6,218,277 

1896 

66 

60,622,700 

29,350,894,884 

1,843,289,239 

6,043,571 

1897 

66 

59,022,700 

31,337,760,948 

1,908,901,898 

6,300,006 

1898 

65 

59,022,700 

39,853,413,947 

2,338,529,016 

7,717,917 

1899 

64 

58,922,700 

57,368,230,771 

3,085,971,371 

10,218,448 

1900 

64 

74,222,700 

51,964,588,564 

2,730,441,810 

8,981,716 

1901 

62 

81,722,700 

77,020,672,494 

3,515,037,741 

11,600,785 

1902 

60 

100,672,700 

74,753,189,435 

3,377,504,072 

11,110,211 

1903 

57 

113,072,700 

70,833,655,940 

3,315,516,487 

10,906,304 

•The  items  of  Capital  are  given  for  various  dates,  amounts  at  a  uniform  date  in  each  year  not  being 
obtainable. 


II 


THE  NATIONAL  BANK*  SYSTEM 


Number  of 

Capital 

Loans  and 

Individual 

Year 

National  Banks 

Paid  in 

Discounts 

Deposits 

1863 

66 

$7,188,393 

$5,466,088 

4$8,497,682 

1864 

467 

75,213,945 

70,746,513 

4122,166,536 

1865 

1,294 

325,834,558 

362,442,743 

4500,910,873 

1866 

1,634 

414,270,493 

550,353,094 

564,616,778 

1867 

1,636 

418,558,148 

588,450,396 

540,797,838 

1868 

1,640 

420,105,011 

655,729,546 

580,940,821 

1869 

1,619 

422,659,260 

686,347,756 

511,400,197 

1870 

1,612 

427,235,701 

719,341,186 

507,368,619 

1871 

1,723 

450,330,841 

789,416,568 

596,586,488 

1872 

1,853 

470,543,301 

871,531,449 

598,114,679 

1873 

1,968 

490,109,801 

925,557,682 

540,510,603 

1874 

1,983 

491,003,711 

926,195,672 

682,846,607 

1875 

2,076 

501,568,564 

972,926,532 

618,517,246 

1876 

2,091 

500,393,796 

933,686,530 

619,350,223 

1877 

2,078 

481,044,771 

901,731,416 

604,512,515 

1878 

2,056 

470,393,366 

835,078,133 

598,805,776 

1879 

2,048 

455,244,415 

835,875,012 

755,459,966 

1880 

2,070 

455,909,565 

994,712,646 

1,006,452,853 

1881 

2,115 

460,227,835 

1,144,988,949 

1,102.679,164 

1882 

2,239 

477,184,390 

1,208,932,656 

1,066,901,720 

1883 

2,417 

500,298,312 

1,285,591,902 

1,106,453,008 

1884 

2,625 

522,515,996 

1,269,862,936 

987,649,056 

1885 

2,689 

526,273,602 

1,257,655,548 

1,111,429,915 

1886 

2,809 

539,109,292 

1,421,547,199 

1,169.716,413 

1887 

3,014 

571,648,811 

1,560,371,741 

1,235,757,942 

1888 

3,120 

588,384,018 

1,628,124,565 

1,331,265,617 

1889 

3,239 

605,851,641 

1,779,054,528 

1,436,402,686 

1890 

3,484 

642,073,676 

1,933,509,333 

1,485,095,856 

1891 

3,652 

672,903,597 

1,963,704,948 

1,602,052,676 

1892 

3,759 

684,678,203 

2,127,757,191 

1,764,456,177 

1893 

3,807 

685,786,719 

2,020,483,671 

1,539,399,795 

1894 

3,770 

671,091,165 

1,944,441,315 

1,695,489,346 

476  THE  NEW  YORK  STOCK  EXCHANGE 


Year 

Number  of 
National  Banks 

Capital 
Paid  in 

1895 

3,715 

$658,224,180 

1896 

3,689 

651,144,855 

1897 

3,610 

632,153,042 

1898 

3,582 

622,016,745 

1899 

3,583 

604,865,327 

1900 

3,732 

621,536,461 

*  Figures  are  from  reports  nearest  to  June  30. 
f  Individual  and  other  deposits. 


Individual 

Deposits 

$1,720,550,241 

1,639,688,394 

1,916,630,252 

2,225,269,813 

2,380,610,361 

2,623,997,522 


III 


Loans  and 
Discounts 

$2,016,639,536 

1,971,642,012 

1,977,553,711 

2,163,681,938 

2,492,230,585 

2,623,512,201 


DEPOSITS  IN  LOAN  AND  TRUST  COMPANIES  AND  BANKS  OTHER  THAN 

NATIONAL  BANKS 


Loan  and 

Year  Trust  Companies 


Savings 

Banks 


State 

Banks 


•Private 

Banks 


1860 

1861 

1862 

1863 

1864 

1865 

1866 

1867 

1868 

1869 

1870 

1871 

1872 

1873 

1874 

1875 

$85,025,371 

1876 

87,817,992 

1877 

84,215,849 

1878 

73,136,578 

1879 

75,873,219 

1880 

90,008,008 

1881 

111,670,329 

1882 

144,841,596 

1883 

165,378,515 

1884 

188,745,922 

1885 

188,417,293 

1886 

214,063,415 

1887 

240,190,711 

1888 

257,878,114 

1889 

299,612,899 

1890 

336,456,492 

1891 

355,330,080 

1892 

411,659,996 

1893 

486,244,079 

1894 

471,298,816 

1895 

546,652,657 

1896 

586,468,156 

1897 

566,922,205 

1898 

662,138,397 

1899 

835,499,064 

$149,277,504 

146,729,882 

169,434,540 

206,235,202 

236,280,401 

242,619,382 

282.455,794 

337,009,452 

392,781,813 

457,675,050 

549,847,358 

650,745,442 

735,046,805 

802,363,609 

864,556,902 

924,037,304 

941,350,255 

866,218,306 

879,897,425 

802,490,298 

819,106,973 

891,961,142 

966,797,081 

1,024,856,787 

1,073,294,995, 

1,095,172,147 

1,141,530,578 

1,235,247,371 

1,364,196,550 

1,425,230,349 

1,524,844,506 

1,623,079,749 

1,712,769,026 

1,785,150,957 

1,747,961,280 

1,810,597,023 

1,907,156,277 

1,939,376,035 

2.065,631,298 

2,230,366,954 


$257,229,562 

296,322,408 

393,686,226 


110,754,034 

143,696,383 

165,871,439 

157,928,658 

226,654,538 

142,764,491 

166,958,229 

208,751,611 

261,362,303 

281,775,496 

334,995,702 

325,365,669 

344,307,916 

342,882,767 

447,995,653 

410,047,842 

507,084,481 

553,054,584 

556,637,012 

648,513,809 

706,865,643 

658,107,494 

712,410,423 

695,659,914 

723,640,795 

912,365,406 

1,164,020,972 


$321,100,000 

322,100,000 

243,840,000 

183,830,000 

139,920,000 

182,667,235 

241,845,554 

295,622,160 


96,580,457 

94,878,842 

83,183,718 

99,521,667 

94,959,727 

93,091,148 

68,552,696 

66,074,594 

81,824,932 

59,116,378 

50,278,243 

62,085,084 

64,974,392 


•Includes  all  private  banks  from  1875  to  1882;  from  1887  to  1902  includes  only  those  voluntarily 
reporting,  estimated  at  one-fourth  of  total  private  banks. 


ANNALS  AND  STATISTICS 


477 


IV 


LIFE  INSURANCE  STATISTICS* 


1860 


1900 


Number  of  companies . 

Number  of  policies  in  force . 

Amount  of  policies  in  force . 

Gross  assets . 

Gross  liabilities,  except  capital. . . 
Surplus  as  regards  policy  holders 

Receipts — Premiums  . 

Receipts — All  other . 

Claims . 


17 

56,046 

$163,703,455 

24,115,686 

17,159,873 

6,995,808 

4,612,722 

1,212,076 

1,390,894 


40 

3,071,253 

$6,947,096,609 

1,723,737,723 

1,565,459,781 

158,277,942 

310,081,527 

74,584,056 

113,612,433 


*  All  companies  reporting  to  the  Superintendent  of  Insurance  of  the  State  of  New  York. 
Complete  statistics  not  available  for  1860.  The  above  cover  about  98  per  cent,  of  aggregate. 


V 

NATIONAL  PRODUCTION  OF  COMMODITIES 

Silver 


Gold 

Commercial 

Coal* 

Pig  Iron 

Year 

Value 

Value 

Tons 

Tons 

1860 

$46,000,000 

$156,832 

8,513,123 

821,223 

1861 

43,000,000 

2,062,151 

7,954,264 

653,164 

1862 

39,200,000 

4,683,880 

7,869,407 

703,270 

1863 

40,000,000 

8,842,326 

9,566,006 

846,075 

1864 

46,100,000 

11,445,950 

10,177,475 

1,014,282 

1865 

53,225,000 

11,642,206 

9,652,391 

831,770 

1866 

53,500,000 

10,356,362 

12,703,882 

1,205,663 

1867 

51,725,000 

13,865,648 

12,988,725 

1,305,023 

1868 

48,000,000 

12,306,938 

28,258,000 

1,431,250 

1869 

49,500,000 

12,297,656 

28,268,000 

1,711,287 

1870 

50,000,000 

17,264,000 

32,863,000 

1,665,179 

1871 

43,500,000 

23,588,214 

41,384,000 

1,706,793 

1872 

36,000,000 

29,406,700 

45,416,000 

2,548,713 

1873 

36,000,000 

35,750,000 

51,004,000 

2,560,963 

1874 

33,500,000 

36,869,000 

46,916,000 

2,401,262 

1875 

33,400,000 

30,549,000 

46,686,000 

2,023,733 

1876 

39,900,000 

34,690,000 

47,500,000 

1,868,961 

1877 

46,900,000 

36,970,000 

53,948,000 

2,066,594 

1878 

51,200,000 

40,270,000 

51,655,000 

2,301,215 

1879 

38,900,000 

35,430,000 

59,333,000 

2,741,853 

1880 

36,000,000 

34,720,000 

63,822,830 

3,835,191 

1881 

34,700,000 

37,850.000 

76,865,357 

4,144,254 

1882 

32,500,000 

41,120,000 

92,219,454 

4,623,323 

1883 

30,000,000 

39,660,000 

102,867,969 

4,595,510 

1884 

30,800,000 

42,070,000 

106,906,295 

4,097,868 

1885 

31,800,000 

42,500,000 

99,069,216 

4,044,526 

1886 

35,000,000 

39,230,000 

101,500,024 

4,683,329 

1887 

33,000,000 

40,410,000 

116,651,974 

6,417,148 

1888 

33,175,000 

43,020,000 

132,731,613 

6,489,738 

1889 

32,800,000 

46,750,000 

126,097,869 

7,603,642 

1890 

32,845,000 

57,225.000 

140.866,931 

9,202,703 

1891 

33,175,000 

57,360,000 

150,505,954 

7,279,870 

1892 

33,000,000 

55,563,000 

160,115,242 

9,157,000 

1893 

35,955,000 

46,800,000 

162,814,977 

7,124,502 

478  THE  NEW  YORK  STOCK  EXCHANGE 


Gold 

Silver 

Commercial 

Coal* 

Pio  Iron 

Tear 

Value 

Value 

ToN8 

Tons 

1894 

$39,500,000 

$31,422,000 

152,447,791 

6,657,888 

1895 

46,610,000 

36,455,000 

172,426,366 

9,446,308 

1896 

53,088,000 

39,655,000 

171,416,390 

8,623,127 

1897 

57,363,000 

32,316,000 

178,769,344 

9,652,680 

1898 

64,463,000 

32,118,000 

196,405,953 

11,773,934 

1899 

71,053,000 

32,859,000 

226,553,564 

13,620,703 

1900 

* 

79,171,000 

Anthracite  only  1860  to  1867. 

35.741,140 

240,788,238 

13,789,242 

VI 

RAILROADS  IN  1903 


The  following  statistics  are  compiled  from  the  volume  for  1904  of  Poor’s  Manual  of 
Railroads. 

The  compilations  emphasize  the  increase  in  fixed  liabilities.  The  year’s  increase  in 
capital  stock  was  $276,916,739,  and  the  expansion  in  funded  debt  was  $256,925,678,  an 
increase  for  the  two  items  of  more  than  $530,000,000.  In  1902  the  increase  in  capital  stock 
was  about  $100,000,000  and  the  expansion  in  funded  debt  about  $430,000,000.  The  heavy 
temporary  borrowings  of  railroads  in  the  year  1903  are  indicated  by  an  increase  of  nearly 
$140,000,000  in  unfunded  debt,  whereas  in  the  two  preceding  years  this  item  had  shown  a 
decrease.  The  figure  given  obviously  does  not  include  the  very  large  temporary  obliga¬ 
tions  incurred  during  the  current  year. 

Following  is  a  comparative  statement  of  income  account  for  the  fiscal  years  1903  and 
1902: 

1903 


Miles  of  railroad  operated  (increase  7,201.35) 


203,885.99 


Traffic  Earnings— 

Passenger  . $429,705,287 

Freight  . 1,344,150,719 

Miscellaneous .  135,001,820 


Total  gross . $1,908,857,826 

Expenses  and  taxes .  1,316,349,314 

Net  earnings . $592,508,512 

Other  receipts .  89,485,484 

Total  available  revenue .  $681,993,996 


Payments— 

Interest  on  bonds .  $239,426,707 

Other  interest .  8,680,451 

Dividends  on  stock .  164,549,147 

Miscellaneous .  61,336,614 

Rentals— Interest  .  38,675,121 

Dividends .  26,125,268 

Miscellaneous .  21,320,600 


Total  payments .  $560,113,908 


Surplus .  $121,880,088 


ANNALS  AND  STATISTICS 


479 


1902 

Miles  of  railroad  operated  (increase  7,201.35) .  199,684.64 

Traffic  Earnings— 

Passenger  .  $396,513,412 

Freight  .  1, 197^212, 452 

Miscellaneous .  127,089,036 


Total  gross . $1,720,814,900 

Expenses  and  taxes .  1,160,788,623 


Net  earnings .  $560,026,277 

Other  receipts .  77,663,483 


Total  available  revenue .  $637,689,760 

Payments— 

Interest  on  bonds .  $222,614,909 

Other  interest . 9,733,560 

Dividends  on  stock .  151,019,537 

Miscellaneous .  57,408,351 

Rentals— Interest  .  40,622,542 

Dividends .  27,154,215 

Miscellaneous .  19,970,212 


Total  payments .  $528,523,326 


Surplus .  $109,166,434 


The  above  figures  bring  out  clearly  the  great  increase  in  railroad  working  costs,  since 
of  an  increase  of  $188,000,000  in  gross  earnings  over  $150,000,000  was  consumed  in  increased 
operating  expenses.  The  percentage  of  operating  expenses  to  earnings  was  68.96,  against 
67.45  in  1902. 

The  greatest  increase  in  earnings  was  in  the  freight  department,  which  aggregated 
$1,344,150,719  in  1903,  as  against  $1,197,212,452  in  1902,  the  increase  of  $146,938,267  being 
equal  to  12.29  per  cent.,  with  an  increase  of  2.75  per  cent,  in  the  average  receipts  per 
ton  per  mile,  which  in  1903  were  7.81  mills,-  as  against  7.64  mills  in  1902  and  7.56  mills  in 
1901. 

According  to  the  statistical  exhibits  the  length  of  steam  railroads  in  the  United 
States  on  December  31,  1903,  was  207,604  miles— a  net  increase  of  4,595  miles  in  the  year. 
The  heaviest  construction  of  the  year  was  in  the  southwestern  group  of  States,  in  which 
no  less  than  1,804  miles  were  built,  Arkansas  having  to  its  credit  189  miles,  Missouri  182 
miles,  Texas  376  miles,  Indian  Territory  198  miles,  and  Oklahoma  Territory  732  miles. 

Following  are  comparisons  of  leading  traffic  items : 


Traffic  Statistics—  1903 

Passengers  carried .  696,908,994 

Passenger  mileage .  20,895,375,853 

Average  rate  per  passenger .  61.52c. 

Average  rate  per  passenger  per  mile .  2.102c. 

Tons  of  freight  moved .  1,299,684,081 

Tons  moved  one  mile .  171,290,310,685 

Average  rate  per  ton .  $1.0293 

Average  rate  per  ton  per  mile .  0.781c. 


480 


THE  NEW  YORK  STOCK  EXCHANGE 


1902 

Passengers  carried .  655,130,236 

Passenger  mileage .  19,706,908,785 

Average  rate  per  passenger .  60.52c. 

Average  rate  per  passenger  per  mile .  2.016c. 

Tons  freight  moved .  1,192,136,510 

Tons  moved  one  mile . 155,624,166,024 

Average  rate  per  ton .  $1.0043 

Average  rate  per  ton  per  mile . 0.764c. 


The  following  table  showing  the  average  rate  of  interest,  the  average  rate  of  divi¬ 
dends,  the  earnings,  gross  and  net,  per  mile  of  road,  and  the  percentage  of  operating 
expenses  to  gross  earnings  will  be  of  interest: 


Earnings  per  Mile 


Year 

Int.  Av. 

Dividends 

Gross 

Net 

P.  C.  Exp. 

1890 . 

4.44 

1.82 

$6,875 

$2,166 

68.50 

1891 . 

4.41 

1.87 

6,851 

2,135 

68.83 

1892 . 

4.25 

1.93 

6,852 

2,068 

69.82 

1893 . 

4.31 

1.88 

6,963 

2,068 

70.29 

1894 . 

4.19 

1.66 

6,054 

1,803 

70.22 

1895 . 

4.24 

1.58 

6,097 

1,804 

70.41 

1896 . 

4.45 

1.52 

6,223 

1,840 

70.43 

1897 . 

4.24 

1.49 

6,228 

1,884 

69.74 

1898 . 

4.21 

1.68 

6,771 

2,111 

68.16 

1899 . 

4.24 

1.90 

7,161 

2,272 

68.27 

3900 . 

4.24 

2.42 

7,826 

2,519 

68.93 

1901 . 

4.21 

2.62 

8,270 

2,668 

67.73 

1902 . 

4.07 

2.93 

8,696 

2,830 

67.45 

1903 . 

4.13 

3.01 

9,301 

2,887 

68.96 

Following  is  a  comparative  statement  of  assets  and  liabilities: 


Assets—  1903 

Cost  of  road  and  equipment . $11,233,311,285 

Real  estate,  stocks,  bonds  and  other  investments .  2,653,851,625 

Other  assets .  552,036,399 

Current  accounts .  422,912,235 


Total  assets . $14,862,111,544 

1902 

Cost  of  road  and  equipment . $10,865,683,376 

Real  estate,  stocks,  bonds  and  other  investments .  2,345,515,940 

Other  assets .  455,053,773 

Current  accounts .  287,854,729 


Total  assets . $13,954,107,818 

1903 

Capital  stock .  $6,355,207,335 

Bonded  debt .  6,722,216,517 

Unfunded  debt .  448,199,448 

Current  accounts .  648,434,976 

Sinking  and  other  funds .  115,201,683 


Total  liabilities . $14,289,259,959 

Excess  of  assets  over  liabilities .  572,851,585 


Total . $14,862,111,544 


ANNALS  AND  STATISTICS 


481 


1902 

Capital  stock .  $6,078,290,596 

Bonded  debt .  6,465,290,839 

Unfunded  debt .  310,345,867 

Current  accounts .  479,957,935 

Sinking  and  other  funds . 140,679,814 


Total  liabilities . $13,474,565,051 

Excess  of  assets  over  liabilities .  479,542,767 


Total 


$13,954,107,818 


VII 


"CAPITALIZATION  OP  AMERICAN  RAILROADS 

ITotal 


Year 

Miles  Operated 

Capital  Stock 

Funded  Debt 

Capitalization 

1860 

30,635 

1871 

60,293 

$2,664,627,645 

1872 

66,171 

$1,647,844,113 

$1,511,578,944 

3,159,423,057 

1873 

70,268 

1,947,638,584 

1,836,904,450 

3,784,543,034 

1874 

72,385 

1,990,997,486 

2,230,766,108 

4,221,763,594 

1875 

74,096 

2,198,601,281 

2,227,030,349 

4,415,631,630 

1876 

76,808 

2,248,358,375 

2,220,233,560 

4,468,591,935 

1877 

79,088 

2,313,278,598 

2,255,318,650 

4,806,202,022 

1878 

81,717 

2,292,257,877 

2,297,790,916 

4,772,297,349 

1879 

86,463 

2,479,965,945 

2,282,540,065 

4,919,387,062 

1880 

92,147 

2,708,673,375 

2,530,874,943 

5,402,038,257 

1881 

103,530 

3,177,375,179 

2,878,423,606 

6,278,565,052 

1882 

114,428 

3,478,914,224 

3,214,084,323 

6,960,649,277 

1883 

120,519 

3,675,793,383 

3,479,411,914 

7,423,040,203 

1884 

125,119 

3,726,655,041 

3,647,312,772 

7,617,986,410 

1885 

127,689 

3,778,609,737 

3,740,255,066 

7,775,858,194 

1886 

133,565 

3,956,377,408 

3,853,748,330 

8,089,268,441 

1887 

147,953 

4,146,958,214 

4,155,628,116 

8,595,041,451 

1888 

154,222 

4,392,287,224 

4,585,471,523 

9,281,914,605 

1889 

159,934 

4,447,103,600 

4,784,173,271 

9,576,939,854 

1890 

163,359 

4,590,471,560 

5,055,225,025 

10,020,925,215 

1891 

167,846 

4,751,750,498 

5,178,821,989 

10,275,675,119 

1892 

171,805 

4,863,119,073 

5,405,049,969 

10,553,624,329 

1893 

175,442 

5,021,576,551 

5,510,225,528 

10,941,711,122 

1894 

178,054 

5,027,604,717 

5,605,775,764 

11,016,308,315 

1895 

179,821 

5,181,373,599 

5,648,659,436 

11,248,569,650 

1896 

181,394 

5,373,187,619 

5,461,856,798 

11,179,544,386 

1897 

183,547 

5,602,694,449 

5,534,432,492 

11,518,066,646 

1898 

184,894 

5,581,522,858 

5,635,363,594 

11,585,069,036 

1899 

187,781 

5,742,181,181 

5,644,858,027 

11,692,817,066 

1900 

192,162 

5,804,346,250 

5,758,592,754 

11,891,902,339 

*  Compiled  from  Poor’s  Manual. 

f  Beginning  with  1877,  total  capitalization  includes  unfunded  debt,  representing  approximately  cost 
of  road  and  equipment. 


482 


THE  NEW  YORK  STOCK  EXCHANGE 


VIII 

NATIONAL  POPULATION  AND  RESOURCES 


1860  1900 


Population  . 

Wealth— true  valuation  of  real  and  personal 

property  . 

Wealth  per  capita . 

Money  in  circulation . 

Circulation  per  capita . 

31,443,321 

$16,159,616,000 

513.93 

435,407,252 

13.85 

76,303,387 

*$94,300,000,000 

1,235.86 

2,055,150,998 

26.93 

Farms  and  farm  property,  value . 

Farm  animals,  total  value . 

Farm  products,  value . 

$7,980,493,060 
1,089,329,915 
*1, 958, 030, 927 

$20,514,001,838 

13,201,054,115 

3,764,177,706 

Manufactures,  value . 

$1,885,861,676 

$13,039,279,566 

Post  Office  receipts . 

$8,518,067 

$102,354,579 

Exports  of  merchandise . 

Imports  of  merchandise . 

$333,576,057 

353,616,119 

$1,394,483,082 

849,941,184 

Government  receipts— net  ordinary . 

Government  expenditures— net  ordinary . 

$56,054,600 

60,056,755 

$567,240,852 

447,553,458 

*  Estimated. 

t  Includes  for  1900,  $220,000,000,  estimated  value  of  animals  in  cities. 
$1870. 


CASH  RESOURCES  OP  THE  UNITED  STATES  TREASURY,  JULY  1,  1905 

This  chapter  of  Annals  and  Statistics  cannot  be  more  impressively  brought  to  a  close 
than  by  the  following  copy  of  the  United  States  Treasurer’s  receipt  for  the  largest  amount  of 
money  which  had  ever  changed  hands,  up  to  the  date  named,  in  one  transaction  in  the 
world’s  history: 

Treasury  of  the  United  States, 
Washington,  D.  C.,  July  1, 1905. 

Received  from  Ellis  H.  Roberts,  retiring  Treasurer  of  the  United  States,  Government  funds  and  securi¬ 
ties  amounting  to  one  billion,  two  hundred  and  fifty-nine  million,  five  hundred  and  ninety-eight  thousand, 
two  hundred  and  seventy-eight  dollars,  and  fifty-eight  and  two-thirds  cents,  for  which  receipts  in  tripli¬ 
cate  have  been  given  as  follows: 


United  States  notes .  $6,520,267  00 

United  States  currency  in  process  of  redemption .  657,472  00 

National  bank  notes  in  process  of  redemption .  14,682,532  31 

Gold  certificates .  1,600,120  00 

Silver  certificates .  1,612.533  00 

Gold  coin .  8,420,888  00 

Standard  silver  dollars .  153,407,591  00 

Fractional  silver  coin . 921,715  33 

Minor  coin .  36,237  04 


Total  cash .  $187,859,355  68 

Treasurer’s  transfer  account .  93,922,330  28 

United  States  paper  currency  in  reserve .  383,352,500  00 

Incomplete  gold  certificates,  series  1900  .  990,000  00 

Bonds  and  other  securities  held  in  trust .  593,474,092  62% 


$1,259,598,278  58% 

CHAS.  H.  TREAT 
Treasurer  of  the  United  States. 


CONSTITUTION  AND  RULES  FOR 
THE  GOVERNMENT  OF  THE 
NEW  YORK  STOCK 
EXCHANGE 


AS  AMENDED  AND  ADOPTED  IN  MARCH,  1902 


X 

CONSTITUTION  AND  RULES  FOR  THE 
GOVERNMENT  OF  THE  NEW  YORK 
STOCK  EXCHANGE 

AS  AMENDED  AND  ADOPTED  IN  MARCH,  1902 

E  text  of  the  original  Constitution  of  the  Exchange,  as 
adopted  by  twenty-seven  brokers  March  8,  1817,  has  been 
given  in  Chapter  Four  of  the  main  narrative  of  this  History. 
The  following  transcript  of  the  Constitution  now  in  force 
exhibits  the  broader  and  vastly  more  detailed  rules  for  the 
conduct  and  government  of  the  New  York  Stock  Exchange 
which  its  growth  has  made  needful  in  the  opening  stages  of  the  Twentieth 
Centurv. 

ARTICLE  I 

Title— Objects 

The  title  of  this  Association  shall  be  the  “New  York  Stock  Exchange/' 

Its  object  shall  be  to  furnish  exchange  rooms  and  other  facilities  for  the  convenient 
transaction  of  their  business  by  its  members,  as  brokers;  to  maintain  high  standards  of 
commercial  honor  and  integrity  among  its  members;  and  to  promote  and  inculcate  just 
and  equitable  principles  of  trade  and  business. 

ARTICLE  II 

Government 

The  government  of  the  Exchange  shall  be  vested  in  a  Governing  Committee,  composed 
of  the  President  and  the  Treasurer  of  the  Exchange,  and  of  forty  Members,  elected  in  the 
manner  hereinafter  provided.  The  members  of  the  Governing  Committee,  and  the  Sec¬ 
retary,  shall  be  the  officers  of  the  Exchange. 


486 


THE  NEW  YORK  STOCK  EXCHANGE 


ARTICLE  III 
Governing  Committee 

Section  1.  The  Members  of  the  Governing  Committee  shall  be  divided  into  four 
classes,  each  class  consisting  of  ten  members,  as  follows:  first  class,  to  hold  office  for  one 
year;  second  class,  for  two  years;  third  class,  for  three  years;  fourth  class,  for  four 
years. 

Sec.  2.  The  Governing  Committee  shall  determine  the  manner  and  form  by  which 
its  proceedings  shall  be  conducted;  appoint  and  dissolve  all  Standing  or  other  Committees; 
define,  alter  and  regulate  their  jurisdiction  as  stated  in  this  instrument ;  have  original  and 
supervisory  jurisdiction  over  any  and  all  subjects  and  matters  referred  to  said  Committees ; 
it  may  direct  and  control  their  actions  or  proceedings  at  any  stage  thereof,  and  shall  try  all 
charges  against  members  of  the  Exchange  and  punish  such  as  may  be  found  guilty.  It 
shall  have  entire  control  of  the  finances  of  the  Exchange  and  fix  the  amount  of  fees  and 
compensation  to  be  paid  to  members  of  Committees,  to  Officers  of  the  Exchange  and  to 
appointees  of  the  Governing  Committee.  It  may  require  of  all  officers  or  appointees  of 
the  Exchange  a  good  and  sufficient  bond  to  secure  the  faithful  performance  of  their  duties. 
The  Governing  Committee  shall  be  vested  with  all  other  powers  necessary  for  the  govern¬ 
ment  of  the  Exchange,  the  regulation  of  the  business  conduct  of  its  members,  and  the 
promotion  of  its  welfare,  objects  and  purposes. 

Sec.  3.  A  Member,  who  shall  be  absent  from  three  consecutive  regular  meetings  of 
the  Governing  Committee,  without  having  been  excused  by  the  President,  may  be  declared 
by  a  two-thirds  vote  of  the  existing  members  of  the  Committee,  to  be  no  longer  a  Member. 

Sec.  4.  All  vacancies  occurring  in  the  Governing  Committee  shall  be  filled  by  said 
Committee  until  the  ensuing  annual  election. 

Sec.  5.  No  member  of  the  Governing  Committee  shall  be  disqualified  from  partici¬ 
pating  in  any  meeting,  action  or  proceeding  of  any  kind  whatever  of  said  Committee,  by 
reason  of  being  or  having  been  a  member  of  a  Standing  Committee  or  Special  Committee 
which  has  made  prior  inquiry,  examination  or  investigation  of  the  subject  under  consider¬ 
ation.  Nor  shall  any  member  of  any  Standing  or  Special  Committee  be  disqualified,  by 
reason  of  such  membership,  from  acting  as  a  member  of  the  Governing  Committee  upon 
any  appeal  from  any  decision  of  such  Standing  or  Special  Committee.  But  no  member 
shall  participate  in  the  adjudication  of  any  case  in  which  he  is  personally  interested. 

Sec.  6.  A  majority  of  all  the  existing  members  of  the  Governing  Committee  shall  be 
necessary  to  constitute  a  quorum. 

Sec.  7.  Any  hearing  or  trial  may  be  adjourned,  from  time  to  time,  by  the  Governing 
Committee  in  its  discretion ;  but  no  member  thereof,  who  shall  not  have  been  present  at 
every  meeting  of  said  Committee  at  which  evidence  is  taken,  or  at  which  an  accused  mem¬ 
ber,  or  a  member  whose  conduct  is  involved  in  the  hearing,  is  heard,  shall  participate  in 
the  final  decision. 

Sec.  8.  In  the  absence  of  both  the  President  and  Vice-President,  any  ten  members 
of  the  Governing  Committee  may  call  a  meeting  thereof  by  written  announcement  from 
the  rostrum. 

Sec.  9.  In  the  case  of  the  temporary  absence,  or  inability  to  act,  of  both  the  Presi¬ 
dent  and  Vice-President,  the  Governing  Committee  may  choose  an  Acting  President  of 
the  Exchange  pro  tern. 

Sec.  10.  The  Governing  Committee  shall  at  its  first  regular  meeting  in  June  of  each 
year,  designate  counsel  for  the  Exchange ;  such  counsel  to  be  employed  at  the  pleasure  of 
said  Committee. 

ARTICLE  IV 

President 

Section  1.  The  executive  power  of  the  Exchange  shall  be  vested  in  the  President,  who 
shall  direct  the  enforcement  of  the  rules  and  regulations  and  have  the  care  of  all  its 
interests.  He  may  preside  over  the  Exchange  whenever  he  shall  so  elect,  and  shall  be  the 
presiding  officer  of  the  Governing  Committee. 

Sec.  2.  The  President  may  call  special  meetings  of  the  Exchange,  and  of  the  Gov¬ 
erning  Committee.  He  shall  call  special  meetings  of  the  Exchange,  upon  the  written 


CONSTITUTION  AND  RULES 


487 


request  of  one  hundred  members,  and  special  meetings  of  the  Governing  Committee,  upon 
the  written  request  of  ten  members  of  said  Committee. 

Sec.  3.  Should  special  exigencies  require,  the  President  may  appoint  committees  ad 
interim,  to  act  until  the  regular  appointments  are  made. 

ARTICLE  V 
Vice-President 

Section  1.  The  Governing  Committee,  at  its  first  meeting  after  every  annual  election, 
shall  choose  from  its  Members  a  Vice-President  of  the  Exchange. 

Sec.  2.  The  Vice-President  shall,  in  the  absence  of  the  President,  assume  all  the 
functions  and  powers,  and  discharge  all  the  duties  of  the  President. 

ARTICLE  VI 

Treasurer 

Section  1.  It  shall  be  the  duty  of  the  Treasurer  to  receive,  and  acting  under  instruc¬ 
tions  from  the  Finance  Committee,  to  take  charge  of  and  disburse  moneys  of  the  Exchange. 
He  shall  present  to  the  Governing  Committee  at  its  first  regular  meeting  in  May  of  each  year 
a  report  of  the  finances  of  the  Exchange  for  the  twelve  months  ending  April  30  preceding. 
He  shall  be  a  member  of  the  Finance  Committee,  and  a  Trustee  of  the  Gratuity  Fund. 

Sec.  2.  In  the  event  of  failure,  neglect  or  inability  of  the  Treasurer,  for  any  reason, 
to  execute  the  duties  of  his  office  the  Finance  Committee  shall  appoint  one  of  its  mem¬ 
bers,  who,  together  with  either  the  President  or  Vice-President,  shall  act  as  Treasurer 
pro  tem. 

ARTICLE  VII 
Secretary 

Section  1.  It  shall  be  the  duty  of  the  Secretary  to  record  in  a  book  of  minutes  the 
proceedings  of  the  Exchange  and  take  charge  of  the  books  and  papers  of  the  Association. 
He  shall  be  the  Secretary  of  the  Governing  Committee  and  of  the  Standing  Committees. 
He  shall  conduct  the  correspondence  of  the  Exchange  and  shall  keep  a  ledger  containing 
the  names  of  all  the  members  with  dates  of  their  admission  and  transfer  of  membership. 
He  shall  be  the  Accountant  of  the  Exchange,  and  shall  perform  such  other  duties  as  the 
Governing  Committee  may  direct. 


ARTICLE  VIII 

Chairman  and  Assistant  Chairman 

Section  1.  The  Governing  Committee  may  appoint  a  Chairman,  who  shall  hold  his 
position  subject  to  the  pleasure  of  said  Committee.  It  shall  be  his  duty  to  preside  over 
the  Exchange  during  business  hours,  maintain  order,  enforce  the  rules,  impose  fines,  and 
perform  such  other  duties  as  the  Committee  of  Arrangements  may  direct. 

Sec.  2.  The  Chairman  shall  not  be  permitted  personally  to  buy  or  sell  securities 
upon  the  floor  of  the  Exchange. 

Sec.  3.  The  Committee  of  Arrangements  may  appoint  an  Assistant  Chairman,  who 
shall  hold  his  position  subject  to  the  pleasure  of  said  Committee,  and  perform  such  duties 
as  said  Committee  may  direct. 

ARTICLE  IX 
Elections 

Section  1.  The  annual  election  of  the  Exchange  shall  be  held  on  the  second  Monday 
of  May;  at  which  time  there  shall  be  elected  by  ballot  a  President,  a  Treasurer,  and  a 
Secretary,  each  for  the  term  of  one  year ;  a  Trustee  of  the  Gratuity  Fund  for  the  term  of 
five  years;  and  ten  Members  of  the  Governing  Committee  for  the  term  of  four  years;  also 
members  to  fill  any  vacancies  which  may  have  occurred  during  the  preceding  year  either 
in  the  Trustees  of  the  Gratuity  Fund  or  in  the  Governing  Committee. 

In  each  case  the  member  receiving  the  highest  number  of  votes  for  any  office  or  posi¬ 
tion  shall  be  declared  elected  thereto. 


488 


THE  NEW  YORK  STOCK  EXCHANGE 


Sec.  2.  At  said  election  there  shall  also  be  chosen  a  Nominating  Committee  to  consist 
of  five  members,  not  officers  of  the  Exchange.  It  shall  prepare  and  report  to  the  Exchange, 
on  or  before  the  second  Monday  of  April  in  the  following  year,  nominations  for  all  the 
offices  or  positions  which  are  to  be  filled  at  the  ensuing  annual  election.  They  shall  hold 
office  for  one  year,  and  any  vacancy  in  the  Committee  shall  be  promptly  filled  by  the 
remaining  members. 

Sec.  3.  Any  member  of  the  Exchange,  in  good  standing,  shall  be  entitled  to  vote  at 
any  election  or  meeting  of  the  Exchange. 

Sec.  4.  When  the  Exchange  shall  be  assembled  for  the  transaction  of  business  other 
than  dealing  in  securities,  a  majority  of  all  the  members  shall  constitute  a  quorum. 

ARTICLE  X 

Eligibility —V acancy  in  Office 

Section  1.  No  person  shall  be  eligible  to  any  office  in  the  Exchange,  or  to  the  position 
of  Chairman  or  Assistant  Chairman,  who  shall  not  be,  at  the  time  of  his  election  or  appoint¬ 
ment,  a  member  in  good  standing. 

Sec.  2.  The  expulsion,  suspension  or  transfer  of  membership  of  a  member  holding 
any  office  or  position,  to  which  he  has  been  either  elected  or  appointed,  shall  create  a 
vacancy  therein  which  shall  be  filled  as  provided  in  these  rules. 

Sec.  3.  In  the  event  of  the  refusal,  failure,  neglect,  or  inability,  of  an  officer  of  the 
Exchange,  to  discharge  the  duties  of  his  office,  or  for  any  good  cause,  of  the  sufficiency 
of  which  the  Governing  Committee  shall  be  the  sole  judge,  said  Committee  shall  have  power, 
by  a  two-thirds  vote  of  all  its  existing  members,  to  remove  said  officer  and  declare  the  posi¬ 
tion  held  by  him  to  be  vacant. 

Sec.  4.  In  case  a  vacancy  shall  occur  in  the  office  either  of  President,  Treasurer  or 
Secretary,  a  new  election  by  ballot  shall  be  held  forthwith  to  fill  such  vacancy  for  the 
unexpired  term. 

Sec.  5.  In  case  of  vacancy  in  the  office  of  Vice-President,  the  same  shall  be  filled  by 
the  Governing  Committee  at  its  next  meeting  after  the  vacancy  occurs. 

Sec.  6.  Every  appointee,  clerk  or  employe  of  the  Exchange  shall  hold  his  office,  place 
or  position  only  during  the  pleasure  of  the  authority  by  which  he  was  appointed;  and  he 
may  be,  at  any  time,  removed,  dismissed  or  discharged  by  a  majority  vote  of  the  Com¬ 
mittee  by  which  he  was  appointed,  or  by  a  like  vote  of  the  Governing  Committee. 

ARTICLE  XI 
Standing  Committees 

Section  1.  Promptly  after  each  annual  election,  the  Governing  Committee  shall 
appoint  from  its  Members  the  following  Standing  Committees : 

First. — A  Committee  of  Arrangements,  to  consist  of  seven  members.  It  shall  have  the 
general  care  and  supervision  of  the  Exchange,  enforce  all  rules  and  regulations  necessary 
to  the  conduct  of  business,  to  good  order  and  the  comfort  of  the  members,  and  consider 
all  complaints  of  violation  of  said  rules.  It  shall  control  and  regulate  the  quotation  service 
and  all  telegraph  or  telephone  connection  with  the  Exchange.  It  shall,  except  as  herein 
otherwise  expressly  provided,  appoint,  dismiss  and  determine  the  number,  duty  and  pay 
of,  all  employes,  and  provide  all  supplies  for  the  Exchange  and  make  all  necessary  repairs 
to  its  building. 

Second. — A  Committee  on  Admissions,  to  consist  of  fifteen  members.  All  applications 
for  membership,  and  all  applications  of  suspended  members  for  reinstatement  to  their 
privileges,  shall  be  referred  to  this  Committee. 

The  affirmative  vote  of  two-thirds  of  the  entire  Committee  shall  be  necessary  to  elect 
to  membership,  or  to  reinstate  a  suspended  member. 

No  application  for  readmission  of  a  person  who  has  ceased  to  be  a  member  of  the 
Exchange  through  violation  of  its  Constitution,  or  for  the  reinstatement  of  a  member  who 
has  been  suspended  under  Sec.  2,  Article  XVI  shall  be  considered  by  this  Committee, 
unless  said  person  has  obtained  the  consent  of  two-thirds  of  the  members  of  the  Governing 
Committee  present,  when  such  application  is  considered. 


CONSTITUTION  AND  RULES 


489 


Third.— An  arbitration  Committee  to  consist  of  nine  members.  It  shall  investigate 
and  decide,  when  properly  brought  before  it,  all  claims  and  matters  of  difference,  arising 
from  contracts  subject  to  the  rules  of  the  Exchange,  between  members  of  the  Exchange, 
or,  at  the  instance  of  a  non-member,  between  members  and  non-members.  The  Commit¬ 
tee  may  dismiss  any  case,  and  refer  the  parties  to  their  remedies  at  law,  and  it  shall  so 
refer  them  upon  the  joint  request  of  the  contestants.  The  decision  of  this  Committee  shall 
be  final  in  all  cases,  unless  an  appeal  shall  be  taken  by  a  member  of  the  Committee,  as  in 
these  rules  provided,  or  in  cases  involving  a  sum  of  $2,500  or  over,  when  either  party  may 
appeal  within  ten  days  to  the  Governing  Committee;  upon  such  appeal,  the  Governing 
Committee  may  finally  adjudicate  the  case,  relegate  the  parties  to  their  remedies  at  law, 
or  direct  a  rehearing  by  the  Arbitration  Committee. 

A  non-member  making  a  claim  shall  execute  an  agreement  to  abide  by  the  rules  of  the 
Exchange,  and  also  a  full  release  of  said  claim,  and  shall  deliver  them  to  the  Chairman 
of  the  Arbitration  Committee,  who  shall  keep  them  in  trust  to  abide  the  result  of  said 
arbitration  and  deliver  them  to  the  defendant  in  any  of  the  following  cases : 

(a.)  In  case  the  plaintiff  shall  fail  to  appear  before  the  Arbitration  Committee  within 
such  time  as  said  Committee  shall  designate. 

(b.)  In  case  judgment  shall  be  rendered  for  said  defendant  by  the  Arbitration  Com¬ 
mittee. 

(c.)  In  case  the  defendant  shall  pay,  or  offer  to  pay,  to  the  claimant  the  amount  of 
judgment  rendered  in  his  favor,  and  shall  have  filed  with  the  Chairman  satisfactory  evi¬ 
dence  of  such  payment  or  proffered  payment. 

In  case  judgment  shall  be  rendered  against  any  member  of  the  Exchange,  which  he 
neglects  to  pay,  or  if  the  case  be  dismissed,  then  such  release  shall  be  canceled  and  returned 
to  the  plaintiff, 

Fourth. — A  Committee  on  Clearing-House  to  consist  of  five  members.  It  shall  have 
general  charge  of  the  Clearing-House  of  the  Exchange  and  the  business  thereof,  and 
shall  from  time  to  time  designate  the  securities  to  be  cleared.  It  may  determine  the  amount 
of  salary  or  compensation  to  be  paid  to  officers  and  employes  of  the  Clearing-House  and 
make  expenditures  from  its  funds  for  the  conduct  of  its  business.  It  shall  make  monthly 
financial  reports  to  the  Finance  Committee. 

Fifth.— A  Committee  on  Commissions  to  consist  of  five  members.  It  shall  enforce 
the  rules  relating  to  commissioners,  partnerships  and  branch  offices,  and  shall  report  to  the 
Governing  Committee  any  undesirable  partnership  or  branch  office  or  any  violation  of  said 
rules. 

Sixth. — A  Committee  on  Constitution  to  consist  of  five  members,  to  which  shall  be 
referred  all  additions,  alterations,  or  amendments  to  the  Constitution.  It  shall  report 
them  back  to  the  Governing  Committee,  but  only  at  regular  meetings  or  at  special  meetings 
called  solely  for  the  purpose  of  considering  them. 

Seventh. — A  Finance  Committee  to  consist  of  seven  members.  It  shall  meet  prior  to 
the  first  regular  meeting  of  the  Governing  Committee  in  each  month  and  examine  the 
various  accounts  and  vouchers;  and,  acting  as  a  Board  of  Audit,  the  Committee  shall 
report  its  examination  to  the  Governing  Committee.  It  shall  also  make  examinations  of 
the  condition  of  the  Gratuity  Fund  as  provided  in  Article  XIX  hereof. 

Eighth. — A  Committee  on  Insolvencies  to  consist  of  three  members  selected  from  the 
Committee  on  Admissions.  It  shall  investigate  every  case  of  insolvency  immediately  after 
the  announcement  thereof  to  the  Exchange.  It  shall  ascertain  the  cause  of  failure  and 
promptly  report  the  result  of  its  examination  to  the  Committee  on  Admissions. 

Ninth. — A  Law  Committee  to  consist  of  five  members,  to  which  shall  be  referred  all 
questions  of  law  affecting  the  interests  of  the  Exchange. 

Tenth. — A  Committee  on  Securities  to  consist  of  five  members.  It  shall  make  rules 
defining  the  requirements  for  regularity  in  delivery  of  securities  dealt  in  at  the  Exchange; 
and  decide  all  questions  relating  to  the  settlement  of  contracts  subject  to  the  rules  of  the 
Exchange,  of  due  bills,  or  irregularities  in  securities,  or  in  deliveries  thereof,  and  all  ques¬ 
tions  relating  to  reclamations  therefor. 

Eleventh.— A  Committee  on  Stock  List  to  consist  of  five  members.  It  shall  receive 
and  consider  all  applications  for  placing  securities  upon  the  list  of  the  Exchange,  and  make 
report  and  recommendation  thereon  to  the  Governing  Committee,  giving  full  statement 


490 


THE  NEW  YORK  STOCK  EXCHANGE 


concerning  organization,  capitalization,  resources  and  indebtedness.  It  shall  have  charge 
of  the  arrangement  and  revision  of  the  regular  list  of  securities. 

Twelfth.— A  Committee  on  Unlisted  Securities  composed  of  one  member  each  from 
the  Committees  of  Arrangements,  Securities  and  Stock  List.  It  shall  have  general  charge 
of  the  Unlisted  Department  of  the  Exchange. 

Sec.  2.  The  Standing  Committees  of  the  Exchange,  and  all  Special  Committees, 
shall  determine  the  manner  and  form  by  which  their  proceedings  shall  be  conducted ;  shall 
make  such  regulations  for  their  government  as  they  shall  deem  proper,  and  may  fill  any 
vacancies  occurring  in  their  membership,  subject  always  to  the  control  and  supervision  of 
the  Governing  Committee. 

Sec.  3.  A  majority  of  the  members  of  any  Committee  shall  be  necessary  to  constitute 
a  quorum. 

ARTICLE  XII 
Appeals 

Section  1.  An  appeal  to  the  Governing  Committee,  from  any  decision  of  a  Stand¬ 
ing  Committee,  may  be  taken  by  a  member  of  the  Exchange,  interested  therein,  if  made 
in  writing  to  the  President  within  two  days  after  said  decision  has  been  rendered:  but 
nothing  herein  contained  shall  authorize  an  appeal  from  a  decision  of  the  Committee  on 
Admissions,  except  as  provided  in  Section  4,  Article  XVI  of  these  Rules,  nor  from  a 
decision  of  the  Arbitration  Committee,  except  as  provided  in  the  third  sub-division  of 
Section  1,  Article  XI,  of  these  Rules. 

Sec.  2.  A  member  of  a  Standing  Committee,  present  at  the  hearing  of  a  case,  may, 
within  two  days  after  a  decision  has  been  made  thereon,  appeal  therefrom  to  the  Govern¬ 
ing  Committee  by  writing,  addressed  to  the  President. 

Sec.  3.  All  appeals  to  the  Governing  Committee  shall  be  submitted  upon  a  printed 
transcript  of  the  record  before  the  Standing  Committee  and  such  printed  arguments  as 
the  parties  to  the  appeal  may  desire  to  submit. 

ARTICLE  XIII 

Applications  for  Membership— Eligibility— Initiation  Fee 

Section  1.  Every  applicant  for  membership  must  be  at  least  twenty-one  years  of  age, 
and  a  citizen  of  the  United  States. 

Sec.  2.  The  membership  of  the  Exchange  shall  not  be  increased  except  by  action  of 
the  Governing  Committee,  which  shall  prescribe  the  number  of  increase  and  the  terms  of 
admission.  Such  action  shall  be  submitted  to  the  Exchange  on  the  same  conditions  as 
those  prescribed  for  amendments  to  the  Constitution. 

Sec.  3.  Members  admitted  by  transfer  shall  pay  to  the  Exchange  an  initiation  fee  of 
Two  Thousand  Dollars. 

Sec.  4.  If  the  initiation  fee  of  an  applicant  for  admission  to  membership  is  not  paid 
on  the  day  of  his  election  and  notification  by  the  Secretary,  such  election  shall  be  void. 

Sec.  5.  No  person,  elected  to  membership,  shall  be  admitted  to  the  privileges  thereof 
until  he  shall  have  signed  the  Constitution  of  the  Exchange.  By  such  signature  he  pledges 
himself  to  abide  by  the  same  and  by  all  subsequent  amendments  thereto. 

ARTICLE  XIY 

Dues  and  Fines— Penalty  for  Non-Payment 

Section  1.  The  dues  of  all  members  of  the  Exchange  shall  be  payable  on  May  1st 
and  November  1st  of  each  year,  and  shall  be  fifty  dollars  semi-annually,  exclusive  of  fines, 
and  of  assessments  under  Article  XVIII  of  the  Constitution. 

Sec.  2.  Any  member  who  shall  neglect  to  pay  his  fines,  dues  or  any  assessment  for  the 
Gratuity  Fund  for  three  months  after  they  become  payable,  shall  be  reported  by  the  Treas¬ 
urer  to  the  President,  who  shall,  after  due  notice  to  the  delinquent,  suspend  said  delinquent 
until  said  dues  are  paid. 

If  the  fines,  dues  or  assessments  of  any  suspended  member,  are  not  paid  at  the 
end  of  one  year  after  they  become  payable,  the  membership  of  said  suspended  member  may 
be  disposed  of  by  the  Committee  on  Admissions. 


CONSTITUTION  AND  RULES 


491 


ARTICLE  XV 
Transfer  of  Membership 

Section  1.  A  transfer  of  membership  may  be  made  upon  submission  of  the  name  of 
the  candidate  to  the  Committee  on  Admissions,  and  the  approval  of  the  transfer  by  two- 
thirds  of  the  entire  Committee.  Notice  of  the  proposed  transfer  shall  be  posted  on  the 
bulletin  in  the  Exchange  for  at  least  ten  days  prior  to  transfer. 

Sec.  2.  All  contracts  subject  to  the  rules  of  the  Exchange,  made  by  a  member  pro¬ 
posing  to  transfer  his  membership,  shall  mature  on  the  tenth  day  of  the  posting  of  notice 
of  the  proposed  transfer ;  and  said  member  shall  not  be  permitted,  thereafter,  to  make  any 
contracts  subject  to  the  rules  of  the  Exchange,  pending  the  approval  of  the  proposed 
transfer  by  the  Committee  on  Admissions. 

This  rule  shall  also  apply  in  cases  where  a  membership  is  disposed  of  by  the  Com¬ 
mittee  on  Admissions. 

Sec.  3.  Upon  any  transfer  of  membership,  whether  made  by  a  member  voluntarily, 
or  by  the  Governing  Committee  or  the  Committee  on  Admissions  in  pursuance  of  the 
provisions  of  the  Constitution,  the  proceeds  thereof  shall  be  applied  to  the  following  pur¬ 
poses  and  in  the  following  order  of  priority,  viz. : 

First.— The  payment  of  all  fines,  dues,  assessments  and  charges  of  the  Exchange,  or 
any  department  thereof,  against  a  member  whose  membership  is  transferred. 

Second. — The  payment  of  creditors,  members  of  the  Exchange,  or  firms  registered 
thereon,  of  all  filed  claims  arising  from  contracts  subject  to  the  rules  of  the  Exchange, 
if,  and  to  the  extent  that,  the  same  shall  be  allowed  by  the  Committee  on  Admissions. 
If  said  proceeds  shall  be  insufficient  to  pay  said  claims,  as  so  allowed,  in  full,  the  same 
shall  be  applied  to  the  payment  thereof  pro  rata. 

Third. — The  surplus,  if  any,  of  said  proceeds  shall  be  paid  to  the  person  whose  mem¬ 
bership  is  transferred,  or  to  his  legal  representatives,  upon  the  execution  by  him  or  them 
of  a  release  or  releases  satisfactory  to  the  Committee  on  Admissions. 

The  Committee  on  Admissions  shall  have  power,  by  rule  or  otherwise,  to  secure  the 
observance  of  the  provisions  of  this  Article. 

Sec.  4.  All  unmatured  debts  or  other  obligations  of  a  member,  arising  out  of  con¬ 
tracts  subject  to  the  rules  of  the  Exchange,  shall  become  due  and  payable  immediately 
prior  to  the  transfer  of  his  membership ;  and  all  claims  filed  with  the  Committee  on 
Admissions,  founded  upon  contracts  subject  to  the  rules  of  the  Exchange,  shall,  if,  and 
to  the  extent  that  the  same  are  allowed  by  said  Committee,  be  liquidated,  and  paid,  pro 
rata,  out  of  the  proceeds  of  said  membership  upon  consummation  of  the  transfer. 

Sec.  5.  A  member  shall  forfeit  all  right  to  share  in  the  proceeds  of  a  membership, 
unless  he  file  a  statement  of  his  claim  with  the  Committee  on  Admissions  prior  to  the  trans¬ 
fer  of  such  membership ;  but  such  claim,  as  allowed  by  the  Committee  on  Admissions,  may 
be  paid  out  of  any  surplus  remaining  after  all  other  claims,  allowed  by  said  Committee, 
have  been  paid  in  full. 

Sec.  6.  Claims  growing  out  of  transactions  between  partners,  who  are  members  of 
the  Exchange,  shall  not  share  in  the  proceeds  of  the  membership  of  one  of  such  partners, 
until  after  all  other  claims,  as  allowed  by  the  Committee  on  Admissions,  have  been  paid 
in  full. 

Sec.  7.  When  a  member  dies,  his  membership  may  be  disposed  of  by  the  Committee 
on  Admissions. 

Sec.  8.  When  a  member  is  expelled,  or  becomes  ineligible  for  reinstatement,  his 
membership  may  be  disposed  of  forthwith  by  the  Committee  on  Admissions. 

Sec.  9.  The  expulsion  or  suspension  of  a  member  shall  not  affect  the  rights  of  cred¬ 
itors,  members  of  the  Exchange  or  of  firms  registered  thereon. 

ARTICLE  XVI 

Insolvent  Members— Suspension — Reinstatement 

Section  1.  A  member  who  fails  to  comply  with  his  contracts,  or  is  insolvent,  or  who 
is  a  partner  in  a  firm,  registered  upon  the  Exchange,  which  fails  to  comply  with  its  con¬ 
tracts,  or  is  insolvent,  shall  immediately  inform  the  President,  in  writing,  that  he  or  his 
firm,  is  unable  to  meet  their  engagements,  and  prompt  notice  thereof  shall  be  given  to  the 


492 


THE  NEW  YORK  STOCK  EXCHANGE 


Exchange.  He  shall  thereby  become  suspended  from  membership  until,  after  having 
settled  with  his  creditors,  or  the  creditors  of  his  firm,  he  has  been  reinstated  by  the  Com¬ 
mittee  on  Admissions. 

Sec.  2.  Whenever  the  President  shall  ascertain  that  a  member  has  failed  to  meet  his 
engagements,  or  is  insolvent,  or  that  a  firm  registered  upon  the  Exchange  has  failed  to 
meet  its  engagements,  or  is  insolvent,  and  that  such  member,  or  such  firm,  has  neglected 
to  comply  with  the  requirements  of  the  preceding  section,  he  shall  announce  to  the  Exchange 
the  insolvency  and  suspension  of  such  member  or  such  firm. 

Sec.  3.  If  a  member,  suspended  under  this  Article,  fails  to  settle  with  his  creditors 
and  apply  for  reinstatement,  within  one  year  from  the  time  of  his  suspension,  his  mem¬ 
bership  shall  be  disposed  of  by  the  Committee  on  Admissions.  The  Governing  Committee 
may,  by  a  two-thirds  vote  of  the  members  present,  extend  the  time  of  settlement  for 
periods  not  exceeding  one  year  each.  At  the  expiration  of  the  time  granted,  the  mem¬ 
bership  of  said  suspended  member  shall  be  disposed  of  as  above  provided. 

Sec.  4.  When  a  suspended  member  applies  for  reinstatement  he  shall  furnish  to 
the  Chairman  of  the  Committee  on  Admissions  a  list  of  his  creditors,  a  statement  of  the 
amounts  originally  owing,  and  the  nature  of  the  settlement  in  each  case.  Notice  of  the 
proposed  consideration  of  the  application  shall  be  given  through  the  Chairman  of  the 
Exchange  on  three  consecutive  days,  and  said  notice  shall  also  be  posted  upon  the  bulletin. 
Upon  the  applicant  presenting  satisfactory  proof  of  settlement  with  all  his  creditors,  the 
Committee  shall  proceed  to  ballot  for  him  in  accordance  with  its  rules  and  regulations. 
Failing  to  receive  the  approving  vote  of  two-thirds  of  the  entire  Committee,  the  applicant 
shall  be  entitled  to  be  balloted  for  at  any  five  subsequent  regular  meetings  of  the  Com¬ 
mittee,  to  be  designated  by  himself :  provided,  however,  that  the  six  ballotings  to  which 
the  applicant  shall  be  entitled  shall  be  within  one  year  from  the  date  of  his  suspension,  or 
within  such  further  extended  time  for  settlement  as  may  have  been  granted  by  the  Gov¬ 
erning  Committee. 

If  on  the  sixth  ballot  the  applicant  be  rejected,  he  may  appeal  within  ten  days  there¬ 
after  to  the  Governing  Committee,  who  may  by  an  affirmative  vote  of  not  less  than 
twenty-five  of  its  members  reinstate  the  applicant. 

If  he  fails  to  make  applications  to  the  Committee  on  Admissions,  to  be  balloted  for  as 
above  provided,  or  if  rejected  by  the  Governing  Committee,  his  membership  shall  be  dis¬ 
posed  of  by  the  Committee  on  Admissions. 

Sec.  5.  Whenever  the  Governing  Committee  shall  determine,  upon  the  report  of 
the  Committee  on  Admissions,  that  the  failure  of  a  member  or  of  a  firm  registered  upon 
the  Exchange,  has  been  caused  by  reckless  or  unbusinesslike  dealing,  said  member,  or  the 
partner  or  partners  in  such  firm  who  are  members  of  the  Exchange  may,  by  a  two-thirds 
vote  of  the  existing  members  of  the  Governing  Committee,  be  declared  ineligible  for  re¬ 
instatement. 

Sec.  6.  Every  suspended  member  shall  file  with  the  Secretary  of  the  Exchange,  within 
thirty  days  after  his  suspension,  a  written  statement  containing  a  complete  list  of  his 
creditors  and  of  the  amount  owing  to  each. 

ARTICLE  XVII 

Expulsion  and  Suspension  from  Membership 

Section  1.  Unless  otherwise  specially  provided,  the  penalty  of  suspension  from  mem¬ 
bership  may  be  inflicted,  and  the  period  of  suspension  determined,  by  the  vote  of  a 
majority  of  the  existing  members  of  the  Governing  Committee;  and  the  penalty  of  expul¬ 
sion  from  membership  or  of  ineligibility  of  a  suspended  member  for  readmission  may 
be  inflicted  by  the  vote  of  two-thirds  of  the  existing  members  of  said  Committee. 

Sec.  2.  A  member  who  shall  be  adjudged,  by  a  two-thirds  vote  of  all  the  existing 
members  of  the  Governing  Committee,  to  be  guilty  of  fraud  or  of  fraudulent  acts,  shall 
be  expelled,  and  the  President  shall  so  declare ;  public  announcement  of  the  expulsion  shall 
be  made  to  the  Exchange  and  the  membership  shall  be  forthwith  disposed  of  by  the  Com¬ 
mittee  on  Admissions. 

Sec.  3.  Whenever  it  shall  appear  to  a  majority  of  the  Committee  on  Admissions  that 
a  misstatement  upon  a  material  point  has  been  made  to  it  by  a  member,  upon  his  applica- 


CONSTITUTION  AND  RULES 


493 


tion  either  for  membership  or  reinstatement  or  extension  of  time,  it  shall  report  the  case  to 
the  Governing  Committee,  who  by  a  two-thirds  vote  of  all  the  existing  members  of  the 
Committee  may  expel  the  member. 

Sec.  4.  Any  member,  who  shall  be  connected  directly,  or  by  a  partner,  or  otherwise, 
with  any  organization  in  the  City  of  New  York  which  permits  dealings  in  any  securities 
or  other  property,  admitted  to  dealing  in  anv  department  of  this  Exchange,  shall  be  liable 
to  suspension  for  a  period  not  exceeding  one  year,  or  to  expulsion,  as  the  Governing  Com¬ 
mittee  may  determine. 

Sec.  5.  A  member  making  a  transaction  with  a  non-member  in  the  rooms  of  the 
Exchange,  either  purchase,  sale  or  loan,  in  any  security  or  property  admitted  to  dealings 
in  any  department  of  the  Exchange,  or  in  money,  shall  be  subject  to  suspension  for  such 
period  not  exceeding  one  year  as  the  Governing  Committee  may  deem  proper. 

Sec.  6.  A  member  who  shall  have  been  adjudged,  by  a  majority  vote  of  all  the 
existing  members  of  the  Governing  Committee  guilty  of  willful  violation  of  the  Constitution 
of  the  Exchange,  or  of  any  resolution  of  the  Governing  Committee  regulating  the  conduct 
or  business  of  members,  or  of  any  conduct  or  proceeding  inconsistent  with  just  and 
equitable  principles  of  trade,  may  be  suspended  or  expelled  as  the  said  Committee  may 
determine,  unless  some  other  penalty  is  expressly  provided  for  such  offense. 

Sec.  7.  The  Governing  Committee  may,  by  a  two-thirds  vote  of  its  members  present, 
require  that  a  member  of  the  Exchange  shall  submit  to  the  Governing  Committee  or  any 
Standing  or  Special  Committee,  for  examination,  such  portion  of  his  books  or  papers  as 
are  material  and  relevant  to  any  matter  under  investigation  by  said  Committee  or  by  any 
Standing  or  Special  Committee.  Any  member  who  shall  refuse  or  neglect  to  comply  with 
such  requirement,  or  shall  willfully  destroy  any  such  required  evidence,  or  who,  being  duly 
summoned,  in  pursuance  of  a  two-thirds  vote  of  the  members  of  the  Governing  Committee 
present,  shall  refuse  or  neglect  to  appear  before  the  Governing  Committee  or  any  Stand¬ 
ing  or  Special  Committee,  as  a  witness,  or  refuse  to  testify  before  any  such  Committee, 
may  be  adjudged  guilty  of  an  act  detrimental  to  the  interest  or  welfare  of  the  Exchange. 

Sec.  8.  The  Governing  Committee  may,  by  a  vote  of  a  majority  of  all  its  existing 
members,  suspend  from  the  Exchange  for  a  period  not  exceeding  one  year,  any  member 
who  may  be  adjudged  guilty  of  any  act  which  may  be  determined  by  said  Committee  to  be 
detrimental  to  the  interest  or  welfare  of  the  Exchange. 

Sec.  9.  An  accusation,  charging  a  member  before  the  Governing  Committee  with 
having  committed  an  offense,  or  having  violated  the  laws  or  regulations  of  the  Exchange, 
shall  be  in  writing;  it  shall  specify  the  charge  or  charges  against  such  member  with  rea¬ 
sonable  detail,  and  shall  be  signed  by  the  person  or  persons  making  the  charge  or  charges. 
A  copy  of  such  charge  or  charges  shall  be  served  upon  the  accused  member  either  personally, 
or  by  leaving  the  same  at  his  office  address  during  business  hours,  or  by  mailing  it  to  him 
at  his  place  of  residence.  He  shall  have  ten  days  from  the  date  of  such  service  to  answer 
the  same,  or  such  further  time  as  the  Governing  Committee  in  its  discretion  may  deem 
proper.  The  answer  shall  be  in  writing,  signed  by  the  accused  member,  and  filed  with 
the  Secretary  of  the  Exchange.  Upon  the  answer  being  filed,  or  if  the  accused  shall  refuse 
or  neglect  to  make  answer  as  hereinbefore  required,  the  Governing  Committee  shall,  at 
a  regular  or  special  meeting  thereafter,  proceed  to  consider  the  charge  or  charges;  if  such 
meeting  be  a  special  meeting,  notice  of  the  object  thereof  shall  be  sent  to  the  members  of 
the  Committee.  Notice  of  such  meeting  shall  be  sent  to  the  accused;  he  shall  be  entitled 
to  be  personally  present  thereat,  and  shall  be  permitted  in  person  to  examine  and  cross- 
examine  all  the  witnesses  produced  before  the  Committee,  and  also  to  present  such  testi¬ 
mony,  defense  or  explanation  as  he  may  deem  proper.  After  hearing  all  the  witnesses 
and  the  member  accused,  if  he  desires  to  be  heard,  the  Governing  Committee  shall  determine 
whether  said  member  is  guilty  of  the  offense  or  offenses  charged.  If  it  determines  that 
the  accused  is  guilty,  the  Governing  Committee  shall  expel  such  member,  or  may  suspend 
him,  as  the  case  may  be;  the  result  shall  be  announced  to  the  Exchange  by  the  President, 
and  a  written  notice  thereof  served  upon  said  member  in  the  manner  hereinbefore  provided. 
The  finding  of  the  Governing  Committee  shall  be  final  and  conclusive. 

Sec.  10.  Should  a  member  be  accused  before  the  Governing  Committee  of  misconduct, 
or  of  having  committed  an  offense  the  penalty  for  which  is  limited  to  suspension  for  a 
period  not  exceeding  sixty  days,  said  Committee  may  proceed  summarily,  and  the  method 


494 


THE  NEW  YORK  STOCK  EXCHANGE 


of  procedure  required  by  the  preceding  Section  shall  not  apply.  The  accused  shall  be 
summoned  before  the  Committee,  informed  of  the  nature  of  the  accusation  against  him 
and  afforded  an  opportunity  for  explanation  by  personal  or  other  testimony.  If  the 
Committee  shall  determine  by  a  majority  vote  of  all  its  existing  members  that  the  accused 
is  guilty,  it  may,  by  a  similar  vote,  suspend  him  from  membership  for  such  period  as  the 
Constitution  provides. 

Sec.  11.  Whenever  a  member  is  suspended  by  the  Governing  Committee,  announce¬ 
ment  thereof  shall  be  made  to  the  Exchange,  and  such  member  shall  be  deprived  during 
the  term  of  his  suspension  of  all  rights  and  privileges  of  membership,  except  those  pertain¬ 
ing  to  the  Gratuity  Fund. 

Sec.  12.  No  member  of  the  Exchange  shall  be  allowed  to  be  represented  by  profes¬ 
sional  counsel  in  any  investigation  or  hearing  before  the  Governing  Committee  or  any 
Standing  or  Special  Committee. 

THE  GRATUITY  FUND  AND  ITS  TRUSTEES 
ARTICLE  XVIII 

The  Gratuity  Fund 

Every  member  of  the  Exchange  shall  be  subject  to  the  conditions  and  entitled  to 
partake  of  the  benefits  of  the  plan  providing  for  the  families  of  deceased  members  as 
hereinafter  set  forth. 

Section  1.  Every  person  who  shall  become  a  member  of  the  Exchange  shall  pay  to 
the  Trustees  of  the  Gratuity  Fund  the  sum  of  Ten  dollars  before  he  shall  be  admitted  to 
the  privilege  of  membership. 

Sec.  2.  Upon  the  death  of  a  member  of  the  Exchange  there  shall  be  levied  and 
assessed  against  every  other  member  the  sum  of  Ten  dollars,  which  shall  thereupon  become 
a  due  from  him  to  the  Exchange,  and  which  shall  be  charged  and  collected  as  other  dues 
and  fines  are  or  may  be  then  charged  and  collected. 

Sec.  3.  Assessments  under  the  provisions  of  this  Article  shall  be  made  equally  against 
all  members,  either  living  or  deceased,  until  the  date  of  the  transfer  of  their  memberships. 

Sec.  4.  The  faith  of  the  Exchange  is  hereby  pledged  to  pay,  within  one  year  after 
proof  of  death  of  any  member,  out  of  the  money  collected  under  the  provisions  of  this 
Article  the  sum  of  ten  thousand  dollars,  or  so  much  thereof  as  may  have  been  collected, 
to  the  persons  named  in  the  next  Section,  as  therein  provided,  which  money  shall  be  paid 
as  a  gratuity  from  the  other  members  of  the  Exchange,  free  from  all  debts,  charges  or 
demands  whatever. 

Sec.  5.  Should  the  member  die  leaving  a  widow  and  no  descendant,  then  the  whole 
sum  shall  be  paid  to  such  widow  for  her  own  use. 

Should  the  member  die  leaving  a  widow  and  descendants,  then  one-half  shall  be  paid  to 
the  widow  for  her  separate  use  and  one-half  to  the  children  for  their  use,  share  and  share 
alike,  provided  that  the  share  of  minor  children  shall  be  paid  to  their  guardian,  and  that 
the  issue  of  any  deceased  child  shall  be  entitled  to  receive  the  share  which  said  child 
would  have  received  if  living,  if  of  age,  directly,  or  if  minors,  through  his,  her  or  their 
guardian  or  guardians. 

Should  the  member  die  leaving  descendants  and  no  widow,  then  the  whole  sum  shall 
be  paid  to  the  children  as  directed  in  the  preceding  paragraph  to  be  done  with  the  moiety ; 
but  no  adopted  child  shall  share  in  the  gratuity  if  the  member  leaves  a  widow  or  descendants. 

Should  the  member  die  leaving  neither  widow  nor  descendant,  but  an  adopted  child  or 
children,  then  the  whole  sum  shall  be  paid  to  such  adopted  child  or  children,  the  issue  of 
any  deceased  adopted  child  to  take  the  share  which  the  parent  would  have  taken  if  living ; 
provided  that  such  adoption  shall  have  been  in  such  manner  and  form  as  to  be  valid  under 
the  laws  of  the  State  of  New  York. 

Should  the  member  die  leaving  neither  widow,  descendant,  adopted  child  nor  issue 
of  a  deceased  adopted  child,  then  the  whole  sum  shall  be  paid  to  the  same  persons  who 
would,  under  the  laws  of  the  State  of  New  York,  take  the  same  by  reason  of  relationship 
to  the  deceased  member  had  he  owned  the  same  at  the  time  of  his  death;  and  if  there  be 
no  such  person,  then  the  assessment  levied  in  such  case  shall  be  credited  to  those  members 


RULES  AND  REGULATIONS 


495 


of  the  Exchange  against  whom  it  shall  have  been  charged,  in  reduction  of  their  payments 
under  this  Article. 

In  all  cases  a  certified  copy  of  the  proceedings  before  a  Surrogate  or  Judge  of  Probate 
shall  be  accepted  as  proof  of  the  rights  of  the  claimants,  be  deemed  ample  authority  to 
the  Exchange  to  pay  over  the  money,  shall  protect  the  Exchange  in  so  doing,  and  shall 
release  the  Exchange  forever  from  all  further  claim  or  liability  whatsoever. 

Sec.  6.  Nothing  herein  contained  shall  ever  be  taken  or  construed  as  a  joint  liability 
of  the  Exchange  or  its  members  for  the  payment  of  any  sum  whatever ;  the  liability  of  each 
member,  at  law  or  in  equity,  being  limited  to  the  payment  of  Ten  dollars  only  on  the 
death  of  any  other  member,  and  the  liability  of  the  Exchange  being  limited  to  the  payment 
of  the  sum  of  ten  thousand  dollars,  or  such  part  thereof  as  may  be  collected,  after  it  shall 
have  been  collected  from  the  members,  and  not  otherwise. 

Sec.  7.  Nothing  herein  contained  shall  be  construed  as  constituting  any  estate  in 
esse  which  can  be  mortgaged  or  pledged  for  the  payment  of  any  debts;  but  it  shall  be 
construed  as  the  solemn  agreement  of  every  member  of  the  Exchange  to  make  a  voluntary 
gift  to  the  family  of  each  deceased  member,  and  of  the  Exchange,  to  the  best  of  its  ability, 
to  collect  and  pay  over  to  such  family  the  said  voluntary  gift. 

Sec.  8.  There  shall  be  credited  annually  to  each  member  of  the  Exchange,  in  reduction 
of  his  payments  under  this  Article,  his  proportion  of  the  surplus  income  of  the  Exchange, 
after  setting  apart  such  sum  as  the  Governing  Committee  shall  determine  to  be  necessary 
for  conducting  the  business  of  the  Exchange. 

Whenever  the  number  of  deaths  of  members  of  the  Exchange  shall  exceed  fifteen  in 
any  one  year,  the  Trustees  of  the  Gratuity  Fund  shall  pay  over  to  the  Treasurer  of  the 
Exchange  the  net  income  which  has  been  received  as  interest  on  the  Fund  during  said 
year,  less  the  necessary  expenses  of  management  and  distribution,  and  each  member  of 
the  Exchange  shall  be  credited  with  his  proportion  of  the  amount,  in  reduction  of  his 
payments  under  this  Article. 

Sec.  9.  The  provisions  of  this  Article  shall  not  extend  to  any  member  whose  con¬ 
nection  with  the  Exchange  shall  have  been  severed  by  the  transfer  of  his  membership, 
whether  the  same  is  made  voluntarily  or  involuntarily,  nor  to  any  member  who  now  is 
or  hereafter  may  be  expelled  by  the  Governing  Committee,  but  shall  extend  to  suspended 
members. 


ARTICLE  XIX 

The  Trustees  of  the  Gratuity  Fund 

Section  1.  The  execution  of  the  provisions  of  the  preceding  Article,  and  the  man¬ 
agement  and  distribution  of  the  Fund  created  thereunder  shall  be  under  the  charge  of  a 
Board  of  Trustees,  to  be  known  as  “The  Trustees  of  the  Gratuity  Fund,”  and  to  consist 
of  the  President  and  the  Treasurer  of  the  Exchange,  and  of  five  other  Trustees  chosen  for 
the  term  of  five  years. 

In  case  of  a  vacancy  occurring  among  the  five  chosen  Trustees,  the  Governing  Commit¬ 
tee,  at  its  next  regular  meeting  thereafter,  shall  proceed  to  fill  the  same  until  the  next 
annual  election  of  the  Exchange. 

Sec.  2.  It  shall  be  the  duty  of  the  Trustees  to  invest  and  keep  securely  invested,  in 
accordance  -with  the  laws  of  the  State  of  New  York  regulating  Trust  Funds,  all  moneys 
paid  to  them  for  the  Fund,  together  with  the  interest  and  accretions  arising  therefrom. 

All  stock  shall  be  registered  in  the  name  of  “The  Trustees  of  the  Gratuity  Fund  of 
the  New  York  Stock  Exchange,”  but  without  specifying  the  individual  names  of  such 
Trustees,  and  may  be  disposed  of  and  assigned  by  any  four  of  said  Trustees. 

Sec.  3.  On  the  first  Monday  after  the  annual  election  of  the  Exchange,  or  as  soon 
thereafter  as  may  be  practicable,  the  Trustees  of  the  Gratuity  Fund  shall  organize  by 
electing  a  Chairman,  and  a  Secretary  and  Treasurer  of  the  Gratuity  Fund,  who  shall  serve 
for  one  year  or  until  their  successors  shall  be  chosen.  The  offices  of  Secretary  and  Treas¬ 
urer  may  be  held  by  the  same  person. 

Sec.  4.  There  shall  be  a  regular  meeting  of  the  Trustees  on  the  third  Monday  in 
each  month.  The  Chairman  may  call  a  snecml  meeting  at  any  time;  he  shall  call  a  meeting 
at  the  request  of  two  Trustees.  At  a  meeting  four  Trustees  shall  constitute  a  quorum. 


496 


THE  NEW  YORK  STOCK  EXCHANGE 


Sec.  5.  It  shall  be  the  duty  of  the  Chairman  to  preside  at  meetings ;  he  shall  vote  on 
all  questions;  he  shall,  on  the  Monday  preceding  the  annual  election  of  the  Exchange, 
make  a  report  to  the  President  of  the  Exchange  of  the  condition  of  the  Fund,  with  a  state¬ 
ment  by  the  Treasurer  of  receipts  and  disbursements. 

Sec.  6.  It  shall  be  the  duty  of  the  Secretary  to  keep  regular  minutes  of  the  proceed¬ 
ings  of  the  Trustees,  and  to  give  notice  of  meetings. 

Sec.  7.  It  shall  be  the  duty  of  the  Treasurer  to  receive  and  sign  vouchers  for  all 
moneys  paid  to  the  Trustees,  which  he  shall  deposit  in  such  institutions  as  they  may 
direct,  to  his  credit  as  “Treasurer  of  the  Gratuity  Fund  of  the  New  York  Stock  Exchange.” 

He  shall  have  the  custody  of  all  securities  belonging  to  the  Fund,  subject  to  the  exam¬ 
ination  and  control  of  the  Trustees. 

He  shall  keep,  or  cause  to  be  kept,  proper  books  of  account. 

He  shall  receive  and  keep  a  record  of  all  claims  for  payment  under  Article  XVIII  of 
the  Constitution  of  the  Exchange,  and  present  the  same  to  the  Trustees  for  their  action ; 
when  allowed  and  approved  by  the  Trustees,  he  shall  pay  the  same;  but  no  such  payment 
shall  be  made  until  directed  by  the  Trustees. 

He  shall  make  such  investments  for  the  Fund  as  may  be  ordered  by  the  Trustees. 

His  books  shall  always  be  open  to  the  inspection  of  any  Trustee,  and  he  shall  make  to ' 
the  Chairman  an  annual  statement  of  receipts  and  disbursements. 

He  shall  receive  out  of  the  Fund  such  compensation  per  annum  as  may  be  fixed  by  the 
Trustees  and  approved  by  the  Governing  Committee  of  the  Exchange. 

Sec.  8.  In  case  any  person  entitled  to  any  gratuity  shall  be  under  age  and  have  no 
guardian  entitled  to  receive  payment  at  the  maturity  thereof,  the  Trustees  may,  in  their 
discretion,  deposit  such  money  with  the  New  York  Life  Insurance  and  Trust  Company 
or  the  United  States  Trust  Company,  as  the  property  of,  and  in  trust  for,  such  minor ;  and 
in  like  manner  if  any  person  apparently  entitled  to  any  payment  fails  to  claim,  or  has 
disappeared  or  cannot  be  found  after  reasonable  inquiry  the  Trustees  may  deposit  the 
presumptive  share  of  such  person  in  either  of  said  Trust  Companies  to  the  credit  of  “The 
Trustees  of  the  Gratuity  Fund  of  the  New  York  Stock  Exchange,  in  trust,”  to  the  end  that 
it  may  be  paid  to  such  person,  if  afterwards  found,  or  otherwise  to  the  parties  who  may 
subsequently  establish  their  right  thereto ;  a  similar  discretion  shall  apply  in  the  case  of  any 
dispute  between  claimants  for  a  gratuity  or  a  portion  thereof. 

Sec.  9.  The  Trustees  shall  have  power  at  their  discretion  to  consult  and  employ  legal 
counsel ;  they  shall  be  authorized  to  make  disbursements  out  of  the  Fund  to  defray  necessary 
expenses,  but  no  such  disbursements  shall  be  allowed  without  a  resolution  specifying  the 
nature  and  amount  of  the  same,  being  entered  at  large  upon  the  Book  of  Minutes  of  the 
Secretary.  Each  Trustee  shall  receive  from  the  Fund  five  dollars  for  every  meeting  at 
which  he  shall  be  present. 

Sec.  10.  In  case  of  a  vacancy  occurring  in  the  office  of  Chairman,  or  Secretary  and 
Treasurer,  the  Trustees  shall  forthwith  proceed  to  fill  the  same  for  the  unexpired  term. 
In  case  of  the  temporary  absence  or  inability  to  act  of  either  the  Chairman,  or  Secretary 
and  Treasurer,  the  Trustees  shall  have  power  to  appoint  one  of  their  number  to  act  in  his 
stead  pro  tem. 

Sec.  11.  The  Governing  Committee  of  the  Exchange  shall,  at  all  times,  have  the  right 
to  direct  the  production  before  it  of  the  securities  belonging  to  the  Fund,  the  Secretary's 
Book  of  Minutes  and  the  Treasurer’s  books  of  account. 

It  shall  be  the  duty  of  the  Finance  Committee  of  the  Exchange  to  make  an  annual 
examination  of  the  condition  of  the  Fund ;  and  it  shall  have  the  right  at  any  time  to  make 
such  additional  examination  thereof  as  it  may  deem  proper. 

Sec.  12.  The  Governing  Committee  of  the  Exchange  shall  have  power  to  try  charges 
against  any  Trustee  for  malfeasance  or  negligence  in  office,  and  by  a  vote  of  two-thirds  of 
all  its  existing  members,  to  suspend  him  from  his  functions  or  to  remove  him  and  declare 
the  office  vacant. 

Sec.  13.  It  shall  be  the  duty  of  the  Treasurer  of  the  Exchange  to  pay  over,  semi¬ 
monthly,  all  assessments  collected  under  Article  XVIII  of  the  Constitution,  to  the  Treas¬ 
urer  of  the  Gratuity  Fund. 


BULES  AND  BEGULATIONS 


497 


RULES  FOR  THE  TRANSACTION  OR  CONDUCT  OF  BUSINESS 

ARTICLE  XX 
Hours  of  Business 

Section  1.  The  Exchange  shall  be  opened  for  the  entrance  of  members  upon  every 
business  day  at  thirty  minutes  after  nine  o’clock  a.  m. 

At  ten  o’clock  the  Chairman  shall  announce  that  the  Exchange  is  open  for  the  trans¬ 
action  of  business,  and  it  shall  so  remain  until  three  o’clock  p.  m.,  when  he  shall  announce 
it  to  be  closed.  On  half  holidays  the  closing  shall  be  at  twelve  o’clock,  noon. 

Sec.  2.  The  Exchange  shall  not  be  closed  at  any  time  between  the  hours  named  in 
the  preceding  Section,  except  by  order  of  the  Governing  Committee. 

Sec.  3.  Dealings  upon  the  Exchange  shall  be  limited  to  the  interval  between  the  hours 
above  named ;  and  a  fine  of  fifty  dollars  for  each  offense  shall  be  imposed  by  the  Chairman, 
upon  any  member  who  shall  make  any  bid,  offer  or  transaction  before  or  after  those 
hours.  Loans  of  money  or  securities  may  be  made  after  the  official  closing  of  the  Exchange. 

Sec.  4.  Dealing  upon  any  other  Exchange  in  the  City  of  New  York  or  publicly  outside 
of  the  Exchange,  either  directly  or  indirectly,  in  securities  listed  or  quoted  on  the  Exchange, 
is  forbidden ;  any  violation  of  this  rule  shall  be  deemed  to  be  an  act  detrimental  to  the 
interest  or  welfare  of  the  Exchange. 


ARTICLE  XXI 
Calls 

The  appointment  and  arrangement  of  Calls  of  Stocks  or  Bonds  shall  be  under  the 
control  and  direction  of  the  Committee  of  Arrangements. 

ARTICLE  XXII 

Contracts  Subject  to  the  Rules  of  the  Exchange 

All  contracts  of  a  member  of  the  Exchange,  or  of  a  firm  having  a  member  of  the 
Exchange  as  a  general  partner,  with  any  other  member  of  the  Exchange,  or  with  any 
other  firm  having  a  member  of  the  Exchange  as  a  general  partner,  for  the  purchase,  sale, 
borrowing,  loaning  or  hypothecation  of  securities,  or  for  the  borrowing,  loaning,  or  pay¬ 
ment  of  money,  whether  occurring  upon  the  floor  of  the  Exchange  or  elsewhere,  are 
contracts  subject  to  the  rules  of  the  Exchange. 

ARTICLE  XXIII 

Bids  and  Offers 

Section  1.  All  bids  and  offers  made  and  accepted  in  accordance  with  these  rules  shall 
be  binding. 

Sec.  2.  All  offers  to  buy  or  sell  securities,  shall  be  for  100  shares  of  stock  or  for 
$10,000  par  value  of  bonds,  unless  otherwise  stated. 

Offers  to  buy  or  sell  specific  amounts,  other  than  as  above  stated,  may  be  made  at  the 
same  time  and  may  be  independently  accepted. 

Sec.  3.  Bids  and  offers  may  be  made  only  as  follows : 

(a.)  “Cash,”  i.  e.,  for  delivery  upon  the  day  of  contract; 

(6.)  “Regular  Way,”  i.  e.,  for  delivery  upon  the  business  day  following  the  contract; 

(c.)  “At  three  days,”  i.  e.,  for  delivery  upon  the  third  day  following  the  contract; 

( d .)  “Buyer’s”  or  “Seller’s”  options  for  not  less  than  four  days  nor  more  than  sixty 
days. 

Bids  and  offers  under  each  of  these  specifications  may  be  made  simultaneously,  as 
being  essentially  different  propositions,  and  may  be  separately  accepted  without  precedence 
of  one  over  another. 

Bids  and  offers  made  without  stated  conditions  shall  be  considered  to  be  in  the  “Reg¬ 
ular  Way.” 

On  transactions  for  more  than  three  days  written  contracts?  shall  be  exchanged  on  the 
day  following  the  transaction,  and  shall  carry  interest  at  the  legal  rate,  unless  otherwise 


498 


THE  NEW  YOKK  STOCK  EXCHANGE 


agreed;  on  such  contracts  one  day’s  notice  shall  be  given,  at  or  before  2.15  p.  m.,  before 
the  securities  shall  be  deliverable  prior  to  the  maturity  of  the  contract. 

On  offers  to  buy  “Seller’s  Option”  or  to  sell  “Buyer’s  Option,”  the  longest  option 
shall  have  precedence.  On  offers  to  buy  “Buyer’s  Option”  or  to  sell  “Seller’s  Option,” 
the  shortest  option  shall  have  precedence. 

Sec.  4.  All  contracts  falling  due  on  holidays  or  half  holidays  observed  by  the  Exchange, 
shall  be  settled  on  the  preceding  business  day,  except  that  when  two  or  more  consecutive 
days  are  holidays  or  half  holidays,  contracts  falling  due  on  other  than  the  first  of  such 
days  shall  be  settled  on  the  next  business  day. 

Loans  of  money  or  securities  made  on  the  day  preceding  a  holiday  or  half -holiday 
observed  by  the  Exchange,  shall  mature  on  the  succeeding  business  day,  unless  otherwise 
specified. 

Sec.  5.  Bids  or  offers  shall  not  be  made  at  a  less  variation  than  one-eighth  of  one 
per  cent. 

Sec.  6.  Bids  and  offers  shall  be  made  on  the  basis  of  a  percentage  of  the  par  value  of 
the  securities  dealt  in;  except  that  in  securities  of  a  par  value  of  Ten  Dollars  or  less  per 
share  the  bid  and  offer  shall  be  in  Dollars  or  fractions  thereof. 

Sec.  7.  Any  member  violating  any  of  the  above  provisions  of  this  Article  shall  be 
fined  by  the  Chairman  in  an  amount  not  exceeding  twenty  dollars ;  for  a  repetition  of  the 
offense,  he  shall  be  liable  to  suspension  for  a  period  not  exceeding  ten  days. 

Sec.  8.  Fictitious  transactions  are  forbidden.  Any  member  violating  this  rule  shall 
be  liable  to  suspension  for  a  period  not  exceeding  twelve  months. 

Sec.  9.  No  offers  to  buy  or  sell  privileges  to  receive  or  deliver  securities,  shall  be 
made  publicly  at  the  Exchange,  under  penalty  of  a  fine  of  twenty-five  dollars  for  each 
offense. 


ARTICLE  XXIV 
Comparisons — Liability  on  Contracts 

Section  1.  It  shall  be  the  duty  of  every  member  to  report  each  of  his  transactions  as 
promptly  as  possible  at  his  office,  where  he  shall  furnish  opportunity  for  prompt  compar¬ 
ison. 

Sec.  2.  It  shall  be  the  duty  of  the  seller  to  compare,  or  to  endeavor  to  compare, 
each  transaction  at  the  office  of  the  Buyer,  not  later  than  one  hour  after  the  closing  of  the 
Exchange.  Nothing  in  this  Article  shall  be  construed  to  justify  a  refusal  to  compare 
before  the  closing  of  the  Exchange. 

Sec.  3.  It  shall  be  the  duty  of  the  buyer  to  investigate,  before  10  o’clock  a.  m.,  of 
the  day  after  the  purchase,  each  transaction  which  has  not  been  compared  by  the  Seller. 

Sec.  4.  Neglect  of  a  member  to  comply  with  the  provisions  of  Sections  1  or  2  hereof 
shall  render  him  liable  to  a  fine  not  exceeding  fifty  dollars,  to  be  imposed  by  the  Committee 
of  Arrangements. 

Sec.  5.  Comparison  shall  be  made  by  an  exchange  of  an  original  and  a  duplicate 
comparison  ticket;  the  party  to  whom  the  comparison  ticket  is  presented  shall  retain  the 
original,  if  it  be  correct,  and  immediately  return  the  duplicate  duly  signed. 

An  exchange  of  Clearing-House  tickets  shall  constitute  a  comparison. 

Sec.  6.  Should  a  difference  be  discovered  in  an  attempt  to  compare,  the  exact  liability 
of  the  disputants  shall  be  promptly  established  by  purchase,  sale  or  mutual  agreement. 

Sec.  7.  If  an  original  party  to  a  transaction  gives  up  his  principal,  the  latter  shall 
have  the  same  duties  in  the  matter  of  comparison  as  the  original  party. 

Sec.  8.  No  comparison  or  failure  to  compare,  and  no  notification  or  acceptance  of 
notification,  shall  have  the  effect  of  creating  or  of  canceling  a  contract,  or  of  changing  the 
terms  thereof,  or  of  releasing  the  original  parties  from  liability. 

Sec.  9.  No  party  to  a  contract  shall  be  compelled  to  accept  a  substitute  principal, 
unless  the  name  proposed  to  be  substituted  shall  be  declared  in  making  the  offer  and  as  a 
part  thereof. 

Orders  for  the  receipt  or  delivery  of  securities,  issued  by  the  Clearing-House,  shall, 
however,  be  binding  and  enforceable  upon  members  or  firms  using  the  facilities  of  the 
Clearing-House. 


RULES  AND  REGULATIONS 


499 


Sec.  10. 
are  liable. 


"When  written  contracts  shall  have  been  exchanged  the  signers  thereof  only 

ARTICLE  XXV 


Payment  and  Delivery 

Section  1.  In  all  deliveries  of  securities,  the  party  delivering  shall  have  the  right  to 
require  the  purchase  money  to  be  paid  upon  delivery;  if  delivery  is  made  by  transfer, 
payment  may  be  required  at  time  and  place  of  transfer. 

Sec.  2.  The  Receiver  of  shares  of  stock  shall  have  the  option  of  requiring  the  delivery 
to  be  made  either  in  certificates  therefor  or  by  transfer  thereof ;  except  that  in  cases  where 
personal  liability  attaches  to  ownership,  the  Seller  shall  have  the  right  to  make  delivery  by 
transfer. 

The  right  to  require  receipt  or  delivery  by  transfer  shall  not  obtain  while  the  transfer 
books  are  closed. 

Sec.  3.  Deliveries  of  securities  on  contracts  subject  to  the  rules  of  the  Exchange 
shall  in  all  cases  conform  to  the  requirements  for  regularity  which  may  be  made,  from 
time  to  time,  by  the  Committee  on  Securities. 

Sec.  4.  The  Buyer  must,  not  later  than  two-fifteen  o’clock  p.  m.,  accept  and  pay  for 
all,  or  any  portion  of  a  lot  of  stock  contracted  for,  which  may  be  tendered  in  lots  of  one 
hundred  shares  or  multiples  thereof ;  and  he  may  buy  in  ‘  ‘  under  the  rule  ’  ’  the  undelivered 
portion,  in  accordance  with  the  provisions  of  Article  XXVIII. 

This  rule  shall  also  apply  to  contracts  for  bonds  when  tender  is  made  in  lots  of  ten 
thousand  dollars  or  multiples  thereof. 


ARTICLE  XXVI 
Settlement  of  Contracts 

Section  1.  All  deliveries  of  Securities  must  be  made  before  quarter  after  two  o’clock 
p.  m.,  and  when  deliveries  are  not  made  by  that  time  the  contract  may  be  closed  “under 
the  rule”  in  the  manner  provided  in  Article  XXVIII  of  these  Rules.  In  the  absence  of 
any  notice  or  agreement  the  contract  shall  continue  without  interest  until  the  following 
business  day;  but  in  every  case  of  non-delivery  of  securities  the  party  in  default  shall  be 
liable  for  any  damages  which  may  accrue  thereby;  and  all  claims  for  such  damages  must 
be  made  before  three  o’clock  p.  m.,  on  the  business  day  following  the  default. 

Sec.  2.  The  neglect  or  failure  of  a  member  or  firm  to  exchange  Clearing-House  tickets 
on  a  contract,  in  conformity  with  the  “Rules  for  Clearing,”  shall  constitute  a  default; 
and  such  defaulted  contract  may  be  closed  as  provided  in  Article  XXVIII;  except  that 
the  limit  of  time  for  delivery  of  notice  of  intention  to  close  such  contract  shall  be  ten- 
thirty  o’clock  a.  m.  of  the  following  business  day,  and  the  time  for  closing  shall  not  be 
before  eleven  o’clock  a.  m. 

Sec.  3.  Parties  receiving  securities  shall  not  deduct,  from  the  purchase  price,  any 
damages  claimed  for  non-delivery,  except  by  the  consent  of  the  party  delivering  the  same. 

Sec.  4.  Notice  for  the  return  of  loans  of  money,  or  of  securities  not  admitted  to  the 
Clearing-House,  must  be  given  before  one  o’clock  p.  m.  Notice  for  the  return  of  loans  of 
securities  admitted  to  the  Clearing-House  must  be  given  before  three-thirty  o’clock  p.  m., 
except  on  half-holidays  observed  by  the  Exchange,  when  such  notice  must  be  given  before 
twelve-thirty  o’clock  p.  m.  All  such  notices  shall  be  considered  as  in  full  force  until 
delivery  is  made. 

Sec.  5.  On  half-holidays  observed  by  the  Exchange,  securities  sold  specifically  for 
“Cash”  must  be  delivered  and  received  at  or  before  eleven-thirty  o’clock  a.  m.  In  case 
of  default  the  contract  may  be  closed  after  eleven-forty  o’clock  a.  m.,  under  the  rule, 
in  manner  provided  in  Article  XXVIII. 

ARTICLE  XXVII 
Clearing-House 

Section  1.  There  shall  be  a  Clearing-House  for  the  purpose  of  acting  as  the  common 
agent  of  the  members  of  the  Exchange  in  receiving  and  delivering  such  securities  as  may 
from  time  to  time  be  designated  by  the  Clearing-House  Committee. 


500 


THE  NEW  YORK  STOCK  EXCHANGE 


Sec.  2.  Nothing  in  the  conduct  of  the  business  of  clearing  shall  attach  any  liability 
to  the  Exchange,  or  to  any  member  of  the  Clearing-House  Committee,  and  delays  on  the 
part  of  the  Clearing-House  shall  not  attach  any  liability  to  members  who  are  clearing. 

Sec.  3.  The  Clearing-House  Committee  shall  designate  from  time  to  time  the  securities 
which  shall  be  cleared,  and,  in  all  transactions  in  such  securities,  the  deliveries  shall  be 
made  through  the  Clearing-House,  unless  otherwise  specially  stipulated  in  the  bid  or  offer, 
or  otherwise  agreed  upon. 

Sec.  4.  The  “Rules  for  Clearing”  and  the  “Rules  for  Dealing”  adopted  by  the  Gov¬ 
erning  Committee,  and  all  amendments  thereto  shall  be  binding  upon  the  members  of  the 
Exchange  equally  with  the  laws  included  in  the  Constitution. 

Amendments  to  “Rules  for  Clearing”  or  to  “Rules  for  Dealing”  may  be  adopted  by 
a  vote  of  two-thirds  of  all  the  existing  members  of  the  Governing  Committee  and  need 
not  be  submitted  to  the  members  of  the  Exchange  for  approval. 

ARTICLE  XXVIII 
Closing  Contracts  “ Under  the  Buie ” 

Section  1.  When  the  insolvency  of  a  member  or  firm  is  announced  to  the  Exchange, 
members  having  contracts  subject  to  the  rules  of  the  Exchange  with  the  member  or  firm, 
shall  without  unnecessary  delay  proceed  to  close  the  same.  If  the  contracts  involve  secur¬ 
ities  admitted  to  quotation  upon  the  Exchange  the  closing  must  be  in  the  Exchange,  either 
officially  by  the  Chairman,  or  by  personal  purchase  or  sale.  If  the  contracts  involve  secur¬ 
ities  not  dealt  in  on  the  Exchange,  the  purchase  or  sale  of  such  securities  must  be  promptly 
made  in  the  best  available  market.  Should  a  contract  not  be  closed,  as  above  provided, 
the  price  of  settlement  shall  be  fixed  by  the  price  current  at  the  time  when  such  contract 
should  have  been  closed  under  this  rule. 

Sec.  2.  A  contract  which  has  not  been  fulfilled  according  to  the  terms  thereof  may  be 
officially  closed  “under  the  rule”  by  the  Chairman,  as  herein  provided. 

Notice  of  intention  to  make  such  closing  of  a  contract  must  be  delivered,  at  or  before 
two-thirty  o’clock  p.  m.,  at  the  registered  office  address  of  the  member  or  firm  in  default. 
And  the  Chairman  shall  not  close  such  contract  before  two-thirty -five  o’clock  p.  m. 

Sec.  3.  Every  notice  of  intention  to  close  a  contract  “under  the  rule,”  because  of 
non-delivery,  shall  be  in  writing ;  and  shall  state  the  name  of  the  member  or  firm  by  whom 
the  order  is  given,  also  for  whose  account — all  of  which  shall  be  announced  by  the  Chairman 
before  closing  the  contract. 

The  closing  of  a  contract  “under  the  rule,”  made  in  conformity  with  such  notice,  shall 
be  also  for  the  account  and  liability  of  each  succeeding  party  in  interest. 

Sec.  4.  Notice  of  intention  to  close  a  contract  “under  the  rule”  may  be  given  upon 
the  entire  amount  in  default  or  upon  any  portion  thereof,  but  in  this  latter  case  for  not 
less  than  one  hundred  shares  of  stock  or  ten  thousand  dollars  of  bonds. 

Sec.  5.  When  notice  that  a  contract  will  be  closed  “under  the  rule”  is  received  too 
late  for  transmission  to  other  members  or  firms  interested  in  such  contract,  within  the 
times  stated  therefor,  the  notified  member  or  firm  who  is  unable  to  so  transmit  said  notice 
may,  immediately  after  the  official  closing  “under  the  rule,”  re-establish  such  contract 
by  a  new  purchase  or  sale  in  the  “regular  way”;  and  any  loss  arising  therefrom  shall  be 
a  valid  claim  against  the  successive  party  or  parties  in  interest. 

Sec.  6.  When  a  member  has  issued  a  notice  of  intention  to  close  a  contract  “under 
the  rule,”  for  default  in  delivery,  he  must  receive  and  pay  for  securities  due  upon  such 
contract  if  tendered  at  his  office  within  five  minutes  of  the  official  time  for  closing ;  or  there¬ 
after,  if  tendered  at  the  rostrum  of  the  Exchange,  before  the  Chairman  has  closed  the 
contract. 

Sec.  7.  When  a  contract  has  been  closed  “under  the  rule,”  the  member  or  firm  who 
gave  the  order  must  give  prompt  notice  of  such  closing  to  the  member  or  firm  in  default. 

Notification  to  successive  parties  in  interest  must  be  transmitted  without  delay,  and 
claims  for  damages,  arising  therefrom,  must  be  made  prior  to  three  o’clock  p.  m.  of  the 
business  day  following  the  closing  of  the  contract. 

Sec.  8.  When  a  contract  has  been  closed  “under  the  rule”  the  Chairman  shall  endorse 
upon  the  order  therefor  the  name  of  the  purchaser  or  seller,  the  price  and  the  hour  at 


RULES  AND  REGULATIONS 


501 


which  such  contract  is  closed,  and  deliver  the  order  to  the  Secretary  of  the  Exchange,  who 
shall  ascertain  whether  the  money  difference,  if  any,  has  been  paid.  If  such  difference 
shall  not  be  paid  within  twenty-four  hours  after  the  closing  of  the  contract,  the  Secretary 
shall  report  such  default  to  the  President. 

Sec.  9.  When  a  contract  is  closed  “under  the  rule,”  any  member  or  firm  accepting 
the  bid  or  offer,  as  made  by  the  Chairman,  and  not  complying  promptly  therewith,  shall 
be  liable  for  any  damages  resulting  therefrom. 

The  member  or  firm,  for  whose  account  a  contract  is  being  closed  “under  the  rule,” 
shall  not  be  permitted  to  accept  the  bid  or  offer  made  by  the  Chairman. 

Sec.  10.  When  a  loan  of  money  is  not  paid  at  or  before  two-fifteen  o’clock  p.  m.  of 
the  day  upon  which  it  becomes  due,  the  borrower  shall  be  considered  as  in  default,  and  the 
lender  may  sell  “under  the  rule”  the  securities  pledged  therefor,  or  so  much  thereof  as 
may  be  necessary  to  liquidate  the  loan,  in  the  manner  prescribed  in  the  foregoing  Sections 
of  this  Article. 

ARTICLE  XXIX 

Irregularity  in  Securities 

Reclamation  for  irregularity  in  securities  must  be  made  within  ten  days  from  the  date 
of  delivery. 

ARTICLE  XXX 

Disagreement  on  Terms  of  Contract 

When  a  disagreement  arising  from  a  transaction  in  securities  shall  be  discovered,  the 
money  difference  shall  forthwith  be  established  by  purchase  or  sale  by  the  Chairman, 
or  by  mutual  agreement. 

ARTICLE  XXXI. 

Deposits  on  Contract 

Section  1.  Mutual  cash  deposits  of  not  exceeding  ten  per  cent,  may  be  required  at 
any  time  by  either  party  to  a  contract.  Whenever  the  margin  of  either  party  becomes 
reduced  to  five  per  cent,  by  reason  of  changes  in  the  market  value  of  the  securities,  further 
deposits  may  be  called,  from  time  to  time,  sufficient  to  restore  the  impaired  margin. 

Sec.  2.  The  holder  of  a  due-bill  issued  for  the  dividend  on  stock  contracted  for,  may 
require  the  maker  of  the  due-bill  to  deposit  the  full  amount  due  thereon,  in  a  Trust  Com¬ 
pany,  payable  to  the  joint  order  of  both  parties. 

Sec.  3.  When  deposits  are  called  before  two  o’clock  p.  m.,  they  must  be  made  at  or 
before  two-thirty  o’clock  of  the  same  day;  if  called  after  two  o’clock  p.  m.  they  must  be 
made  at  or  before  ten-thirty  o’clock  a.  m.  of  the  following  business  day. 

On  half -holidays  observed  by  the  Exchange,  deposits  called  before  eleven  o’clock  a.  m. 
must  be  made  at  or  before  eleven-thirty  o’clock  a.  m. ;  if  called  after  eleven  o’clock  a.  m. 
they  must  be  made  at  or  before  ten -thirty  o’clock  a.  m.  of  the  next  business  day. 

Sec.  4.  Failure  of  either  party  to  a  contract  to  comply  with  a  demand  for  a  deposit 
shall  constitute  a  default ;  and  the  other  party  to  the  contract  may  report  such  default  to 
the  Chairman,  and  instruct  him  to  re-establish  the  contract  forthwith,  by  a  new  purchase 
or  sale  “under  the  rule,”  and  any  difference  arising  therefrom  shall  be  paid  to  the  party 
entitled  thereto. 

Written  notice  of  intention  to  re-establish  the  contract  shall  be  sent  to  the  office  of  the 
party  in  default. 

Sec.  5.  Unless  otherwise  mutually  agreed,  deposits  on  contracts  shall  be  made  in  the 
New  York  Life  Insurance  and  Trust  Company. 

ARTICLE  XXXII 

Dividends — Interest— Premium 

Section  1.  On  the  day  of  closing  of  the  transfer  books  of  a  corporation  for  a  dividend 
upon  its  shares  all  transactions  therein  for  “Cash”  shall  be  “dividend  on”  up  to  the  time 
officially  designated  for  the  closing  of  transfers;  all  transactions  on  that  day  other  than 
for  “Cash”  shall  be  “ex-dividend.” 


502 


THE  NEW  YORK  STOCK  EXCHANGE 


Should  the  closing  of  transfers  occur  upon  a  holiday  or  half-holiday,  observed  by 
the  Exchange,  transactions  on  the  preceding  business  day,  other  than  for  “Cash,”  shall 
be  ‘  ‘  ex-dividend.  ’  ’ 

Sec.  2.  The  Buyer  shall  be  entitled  to  receive  all  interest,  dividends,  rights  and  privi¬ 
leges,  except  voting  power,  which  may  pertain  to  the  securities  contracted  for,  and  for 
which  the  transfer  books  shall  close  during  the  pendency  of  the  contract. 

When  such  contract  shall  mature  before  the  official  date  for  payment  of  such  interest, 
dividend,  right  or  privilege  the  Seller  shall  deliver  a  due-bill  therefor  signed  or  endorsed 
by  him. 

Sec.  3.  A  charge  of  one  per  cent,  may  be  made  for  collecting  dividends.  For  scrip  or 
stock  dividends  the  charge  shall  be  computed  upon  the  market  value  of  such  scrip  or 
stock. 

No  charge  shall  be  made  for  collecting  dividends  accruing  on  securities  deliverable  on 
a  contract. 

Sec.  4.  Offers  to  buy  or  sell  dividends  shall  not  be  made  publicly  on  the  Exchange. 
The  Chairman  shall  impose  a  fine  of  twenty-five  dollars  for  each  violation  of  this  rule. 

Sec.  5.  When  securities  are  borrowed  or  loaned  the  sum  agreed  upon,  either  as  interest 
for  carrying  or  as  premium  for  use,  shall  be  paid  whether  such  securities  are  delivered 
or  not. 

Sec.  6.  When  money  or  securities  are  loaned  at  a  premium  said  premium  shall  apply 
only  to  the  day  for  which  the  loan  is  made. 

ARTICLE  XXXIII 
Transfer  and  Registry 

Section  1.  Corporations  whose  shares  are  admitted  to  dealings  upon  the  Exchange 
will  be  required  to  maintain  a  Transfer  Agency  and  a  Registry  office  in  the  City  of  New 
York,  Borough  of  Manhattan.  Both  the  Transfer  Agency  and  the  Registrar  must  be 
acceptable  to  the  Committee  on  Stock  List,  and  the  Registrar  must  file  with  the  Secretary 
of  the  Exchange  an  agreement  to  comply  with  the  requirements  of  the  Exchange  in  regard 
to  registration. 

Sec.  2.  When  a  corporation  purposes  to  increase  its  authorized  capital  stock,  thirty 
days’  notice  of  such  proposed  increase  must  be  officially  given  to  the  Exchange,  before  such 
increase  may  be  admitted  to  dealings. 

Sec.  3.  When  the  capital  stock  of  a  corporation  is  increased  through  conversion  of 
convertible  bonds,  already  listed,  the  issuing  corporation  shall  give  immediate  notice  to 
the  Exchange  and  the  Committee  on  Stock  List  may,  thereupon,  authorize  the  registration 
of  such  shares  and  add  them  to  the  list. 

Sec.  4.  The  Governing  Committee  may  suspend  dealings  in  the  securities  of  any 
corporation  previously  admitted  to  quotation  upon  the  Exchange,  or  it  may  summarily 
remove  any  securities  from  the  list. 

Sec.  5.  After  the  admission  of  a  security  to  dealings  upon  the  Exchange  no  change  in 
the  form  of  certificate,  or  of  the  Transfer  Agency  or  the  Registrar  of  Shares,  or  of  the 
Trustee  of  Bonds  shall  be  made  without  the  approval  of  the  Committee  on  Stock  List. 

ARTICLE  XXXIY 
Commissions 

Section  1.  Commissions  shall  be  charged  and  paid,  under  all  circumstances,  upon  all 
purchases  or  sales  of  securities  dealt  in  upon  the  Exchange ;  and  shall  be  absolutely  net, 
and  free  from  all  or  any  rebatement,  return,  discount  or  allowance  in  any  shape  or  manner 
whatsoever,  or  by  any  method  or  arrangement,  direct  or  indirect;  and  no  bonus,  nor  any 
percentage  or  portion  of  the  commission,  shall  be  given,  paid  or  allowed,  directly  or  indi¬ 
rectly,  or  as  a  salary,  or  portion  of  a  salary,  to  any  clerk  or  person,  for  business  sought  or 
procured  for  any  member  of  the  Exchange. 

Sec.  2.  All  commissions  shall  be  calculated  upon  the  par  value  of  securities  and  the 
rates  shall  be  as  follows: 

(a.)  On  business  for  parties  not  members  of  the  Exchange,  including  joint  account 
transactions  in  which  a  non-member  is  interested,  transactions  for  partners  not  members 


RULES  AND  REGULATIONS  503 

of  the  Exchange,  and  for  firms  of  which  the  Exchange  member  or  members  are  special 
partners  only,  the  commission  shall  be  not  less  than  one-eighth  of  one  per  cent. 

(6.)  On  business  for  members  of  the  Exchange,  the  commission  shall  be  not  less  than 
one-thirty-second  of  one  per  cent.,  except  when  a  principal  is  given  up,  in  which  case  the 
commission  shall  be  not  less  than  one-fiftieth  of  one  per  cent. 

(c.)  On  Mining  Shares  and  Subscription  Rights,  such  rates,  to  members  and  non¬ 
members  as  may  be  determined,  from  time  to  time,  by  the  Committee  on  Commissions, 
with  the  approval  of  the  Governing  Committee. 

( d .)  Government  and  Municipal  Securities  are  exempted  from  the  provisions  of  this 
Article. 

Sec.  3.  A  firm  having  as  a  general  partner  a  member  of  the  Exchange,  shall  be 
entitled  to  have  its  business  transacted  at  the  rates  of  commission  hereinbefore  prescribed 
for  members.  A  member  of  the  Exchange  cannot  confer  this  privilege  upon  more  than 
one  firm  at  any  one  time. 

Sec.  4.  A  proposition  for  the  transaction  of  business,  at  less  than  the  minimum  rates 
of  commission  herein  provided,  shall  constitute  a  violation  of  this  Article. 

Sec.  5.  A  member  suspended  by  the  Governing  Committee  shall  not,  during  the  time 
of  his  suspension,  be  entitled  to  have  his  business  transacted  at  member’s  rates  of  commis¬ 
sion. 

A  member  who  is  in  suspension  by  reason  of  insolvency  may  have  his  business  transacted 
at  member ’s  rates. 

Sec.  6.  If  the  Governing  Committee  shall,  by  a  majority  vote  of  all  its  existing 
members,  determine  that  a  member  of  the  Exchange  has  violated  the  provisions  of  this 
Article,  it  shall  suspend  such  member,  for  the  first  offense,  for  such  period  not  less  than 
one  year  nor  more  than  five  years,  as  a  majority  of  the  membei's  of  said  Committee  present 
may  determine.  A  member  adjudged  guilty  of  a  second  offense,  by  a  majority  vote  of  all 
the  existing  members  of  the  Governing  Committee,  shall  be  expelled  by  a  like  vote. 

ARTICLE  XXXY 

Office  Address — Partnerships— Branch  Offices 

Section  1.  Every  member  shall  register  with  the  Secretary  an  address,  and  subsequent 
changes  thereof,  where  notices  may  be  served.  The  registered  address  of  every  member, 
transacting  business  upon  the  Exchange,  must  be  in  its  vicinity. 

Sec.  2.  "When  a  member  shall  form  a  partnership  he  shall  immediately  register  the 
same  with  the  Secretary ;  official  announcement  thereof  shall  be  made  to  the  Exchange  and 
notice  posted  upon  the  bulletin  for  ten  days.  Notice  of  dissolution  of  partnership  must 
be  given  in  like  manner. 

Sec.  3.  No  person  shall  be  eligible  to  either  general  or  special  partnership  in  more 
than  one  registered  firm  at  the  same  time. 

Sec.  4.  A  member  shall  not  form  a  partnership  with  a  suspended  member  of  the 
Exchange,  nor  with  any  person  who  has  been  expelled  therefrom ;  nor  with  any  insolvent 
person,  or  with  any  person  who  may  have  previously  been  a  member  of  the  Exchange,  and 
against  whom  any  member  holds  a  claim,  arising  out  of  transactions  made  during  the  time 
of  such  membership,  and  which  has  not  been  released,  or  settled  in  accordance  with  the 
laws  of  the  Exchange. 

A  member,  who  is  a  special  partner  in  a  firm,  does  not  thereby  confer  any  of  the  priv¬ 
ileges  of  the  Exchange  on  such  firm. 

Sec.  5.  A  member  of  the  Exchange  wTho  is  a  general  partner  in  a  firm  represented 
thereon  is  liable  to  the  same  discipline  and  penalties  for  any  act  or  omission  of  said  firm, 
as  if  the  same  were  committed  by  him  personally ;  but  the  Governing  Committee  may  in  its 
discretion  by  a  vote  of  not  less  than  thirty  members  relieve  him  from  the  penalty  therefor. 

Sec.  6.  Members  may,  by  the  consent  and  approval  of  the  Committee  on  Commissions, 
establish  Branch  Offices.  Such  offices  must  be  in  charge  of  either  a  partner,  or  of  a  manager 
or  clerk  acceptable  to  said  Committee. 

The  member  or  firm  establishing  a  Branch  Office  shall  register  it  with  the  Secretary 
of  the  Exchange,  and  shall  be  directly  responsible  for  the  conduct  of  its  business. 


504  THE  NEW  YORK  STOCK  EXCHANGE 

The  managing  clerk  and  all  other  employes  must  be  paid  fixed  salaries,  not  varying 
with  the  business. 

No  agents,  for  the  solicitation  of  business,  shall  be  employed  on  any  other  than  the 
foregoing  basis. 

Sec.  7.  Whenever  it  shall  appear  to  the  Governing  Committee  that  a  member  has 
formed  a  partnership,  or  established  a  branch  office,  whereby  the  interest  or  good  repute 
of  the  Exchange  may  suffer,  the  Committee  may  require  the  dissolution  of  such 
partnership,  or  the  discontinuance  of  such  branch  office,  as  the  case  may  be. 

Sec.  8.  Any  member  failing  to  comply  with  any  requirement  of  this  Article,  or  with 
any  requirement  of  the  Governing  Committee  in  regard  thereto,  shall  be  liable  to  suspen¬ 
sion  for  a  period  not  exceeding  one  year. 

ARTICLE  XXXVI 

Disorderly  Conduct 

Section  1.  Indecorous  language,  or  an  act  subversive  of  good  order  and  decorum,  or 
serious  interference  with  the  personal  comfort  or  safety  of  another  person  is  forbidden. 
Any  member  who  shall  violate  this  rule,  within  the  limits  of  any  department  of  the 
Exchange,  may  be  fined  by  the  Chairman,  or  by  the  Committee  of  Arrangements,  in  a 
sum  not  exceeding  fifty  dollars;  or  upon  complaint  made  may  be  summoned  before  the 
Governing  Committee  and  suspended  for  a  period  not  exceeding  sixty  days. 

Sec.  2.  The  Committee  of  Arrangements  may  make  rules  to  govern  the  conduct  of 
members  upon  the  Exchange;  it  may  impose  a  fine,  not  exceeding  fifty  dollars,  for  each 
violation  thereof,  or  may  report  the  delinquent  to  the  Governing  Committee,  who  may 
suspend  him  for  a  period  not  exceeding  sixty  days. 

Sec.  3.  Betting  or  offering  to  bet,  upon  the  floor  of  the  Exchange,  is  forbidden.  A 
member  violating  this  rule  shall  be  subject  to  the  penalties  prescribed  in  the  preceding 
Section  of  this  Article. 

ARTICLE  XXXVII 
Minutes— Visitors— Communications 

Section  1.  Members  shall  have  access  to  the  minutes  of  the  Exchange. 

Sec.  2.  Visitors  shall  not  be  admitted  to  the  floor  of  the  Exchange  except  by  permis¬ 
sion  of  the  President  or  the  Committee  of  Arrangements. 

Sec.  3.  Communications  shall  not  be  read  to  the  Exchange  without  the  consent  of  the 
President  or  the  Committee  of  Arrangements. 

ARTICLE  XXXVIII 
Alterations  of  the  Constitution 

The  Governing  Committee  may  make  additions,  alterations  or  amendments  to  the 
Constitution  by  a  majority  vote  of  all  its  existing  members.  Every  proposed  addition, 
alteration  or  amendment  must  be  presented,  in  writing,  at  a  regular  meeting  of  the  Govern¬ 
ing  Committee  and  referred  to  the  Committee  on  Constitution,  wffiich  shall  report  thereon 
at  the  next  regular  meeting  of  the  Governing  Committee,  or  at  a  special  meeting  called 
for  the  sole  purpose  of  considering  it.  Action  thereon  may  be  postponed  to  a  fixed  date 
by  a  vote  of  two-thirds  of  the  members  of  the  Governing  Committee  present.  Such  alter¬ 
ations  when  adopted  by  the  Governing  Committee  shall  be  submitted  to  the  Exchange 
and  shall  stand  as  the  law  of  the  Exchange,  if  not  disapproved  within  one  week  by  a 
majority  vote  of  the  entire  membership. 

No  alteration  of  Article  XVIII  shall  ever  be  made  which  will  impair,  in  any  essential 
particular,  the  obligation  of  each  member  to  contribute,  as  therein  provided,  to  the  provision 
for  the  families  of  deceased  members. 


RULES  AND  REGULATIONS  505 

RESOLUTIONS  ADOPTED  BY  THE  GOVERNING  COMMITTEE 

Advertising 

February  9,  1898. 

“Resolved,  that  in  future  the  publication  of  an  advertisement  of  other  than  a  strictly 
legitimate  business  character,  by  a  member  of  the  Exchange,  shall  be  deemed  an  act  detri¬ 
mental  to  the  interest  and  welfare  of  the  Exchange.” 

Arbitrage  Dealings 

January  26,  1898. 

“Whereas,  the  so-called  Arbitrage  business  or  trading  between  this  Exchange  and 
that  of  any  other  city  in  the  United  States,  based  upon  quotations  from  the  floor  of  this 
Exchange,  has  resulted  in  practically  ignoring  the  commission  law ;  therefore 

“Resolved,  that  in  the  judgment  of  this  Committee  the  sending  of  continuous  quo¬ 
tations  or  quotations  at  frequent  intervals  by  members  of  this  Exchange,  from  the  floor 
of  the  Exchange,  is  detrimental  to  the  interest  and  welfare  of  the  Exchange,  and  that  any 
member  engaging  in  such  business  or  trading,  shall  be  proceeded  against  under  Section  8 
of  Article  XVII  of  the  Constitution. 

“Resolved,  that  the  Committee  of  Arrangements  be  and  they  hereby  are  authorized 
and  instructed  to  prevent  the  transaction  of  any  such  business  or  trading  by  any  member 
of  this  Exchange,  and  to  prefer  charges  against  any  member  engaging  therein.” 

Bids  and  Offers 

December  14,  1898. 

‘  ‘  That  where  parties  have  orders  to  buy  and  orders  to  sell  the  same  security,  said  parties 
must  offer  said  security,  whether  it  be  stock  or  bonds  at  one-eighth  per  cent,  higher  than 
their  bid  before  making  transactions  with  themselves.” 

Branch  Offices 

February  13,  1901. 

“That  the  Governing  Committee  rules,  that  the  privileges  provided  for  under  Section 
3,  of  Article  XXXIV,  of  the  Constitution,  can  only  be  conferred  upon  a  Branch  House 
when  established  under  the  same  name  as  the  parent  firm  and  in  which  the  partners  and 
their  respective  interests  are  identical  with  those  of  parent  firm.” 

Bucket  Shops 

March  11,  1896. 

“Any  member  of  this  Exchange  who  is  interested  in,  or  associated  in  business  with,  or 
whose  office  is  connected  directly  or  indirectly  by  wire  or  other  method  of  contrivance 
with,  any  organization,  firm  or  individual  engaged  in  the  business  of  dealing  in  differences 
or  quotations  on  the  fluctuations  in  the  market  price  of  any  commodity  or  security  without 
a  bona-fide  purchase  or  sale  of  said  commodity  or  security  in  a  regular  market  or  Exchange, 
shall  on  conviction  thereof  be  deemed  to  have  committed  an  act  or  acts  detrimental  to  the 
interest  and  welfare  of  this  Exchange.” 


Commissions 

Resolution  of  the  Governing  Committee,  November  23,  1881: 

‘  ‘  That  in  transactions  where  orders  are  received  from  a  non-member,  wherein  the  broker 
filling  the  order  is  directed  to  give  up  another  broker  or  Clearing-House,  the  responsibility 
of  collecting  the  full  commission  of  %  per  cent,  shall  rest  with  the  Broker  or  Clearing- 
House  settling  the  transaction.” 

Resolution  of  the  Governing  Committee,  October  24,  1894 : 

“Resolved,  that  in  transactions  where  orders  are  received  from  a  member,  on  which 
a  clearing  firm  is  given  up  by  said  member  or  by  his  order,  the  responsibility  of  collecting 
the  full  commission  of  1/32  of  1  per  cent,  shall  rest  with  said  clearing  firm;  and  it  shall 


506 


THE  NEW  YORK  STOCK  EXCHANGE 


be  the  duty  of  the  broker  who  executes  such  orders  to  report  the  transactions  to  the 
clearing  firm  and  render  to  them  and  collect  his  bill  therefor  at  the  rate  of  1/50  of  1  per 
cent.,  and  also  that  where  a  broker  executes  an  order  for  a  member  and  clears  the  security 
himself,  he  must  charge  1/32  of  1  per  cent.” 

April  14, 1897. 

“Resolved,  that  transacting  or  offering  to  transact  business  in  grain,  produce,  cotton 
or  other  commodities,  without  commission  or  for  a  nominal  commission,  by  any  member 
of  this  Exchange  or  firm  represented  therein,  for  a  customer  dealing  in  securities  dealt 
in  at  the  Exchange,  is  a  method  or  arrangement  for  rebatement  of  commissions,  and  is  a 
violation  of  the  commission  law. 

“Resolved,  that  giving  or  offering  to  give  reciprocal  business  in  grain,  produce,  cotton 
or  other  commodities  dependent  upon  the  amount  of  Stock  Exchange  business  received  is 
a  method  or  arrangement  for  rebatement  of  commissions  and  is  a  violation  of  the  commis¬ 
sion  law.” 

June  22,  1898. 

“That  in  the  judgment  of  the  Governing  Committee,  any  member  of  the  Exchange, 
who  by  agreement  or  otherwise,  directly  or  indirectly,  assumes  or  bears  for  his  own  account, 
or  relieves  his  principal  from  any  part  of  the  stamp  taxes  imposed  by  the  Act  of  Congress 
passed  June  13,  1898,  upon  any  sales  or  agreements  for  the  sale  of  any  stocks,  sold  or 
agreed  to  be  sold  for  account  of  such  pi’incipal,  is  guilty  of  a  violation  of  Article  XXXIY 
of  the  Constitution  of  the  Exchange  relating  to  commissions.” 

January  23,  1901. 

“That  the  employment  of  a  clerk  or  clerks  in  a  nominal  position  because  of  the  busi¬ 
ness  obtained  by  such  clerk  or  clerks  for  their  employer,  is  a  violation  of  the  rules”; 
Articles  XXXIY  and  XXXV  of  the  Constitution. 

March  26,  1902. 

“Resolved,  that  any  agreement  or  arrangement  entered  into  between  a  member  or  his 
firm,  and  his  or  their  customer,  whereby  special  and  unusual  rates  of  interest  are  stipulated 
for,  or  money-advances  upon  unusual  terms  are  made  a  condition,  in  connection  with  the 
conducting  of  an  account,  with  intent  thereby  to  give  special  or  unusual  advantages  to 
such  customer,  for  the  purpose  of  securing  his  business,  shall  be  deemed  to  be  a  violation 
of  Article  XXXIY  of  the  Constitution,  commonly  known  as  the  Commission  Law.” 


Consolidated  Exchange 

January  11,  1888. 

“Resolved,  that  in  the  judgment  of  this  Committee,  any  connection  direct  or  indirect, 
by  means  of  telephone,  ticker,  telegraph  wire,  or  any  electrical  or  other  contrivance  or 
device,  or  pneumatic  tube,  or  other  apparatus  or  device  whatsoever,  between  the  New  / 
York  Stock  Exchange  Building  or  any  part  thereof,  and  the  new  building  of  the  Consoli¬ 
dated  Stock  and  Petroleum  Exchange,  or  any  part  thereof,  or  any  room,  place,  hallway 
or  space  thereof  or  therein,  or  any  transmission  direct  or  indirect,  of  information  from  said 
Stock  Exchange  Building  to  said  new  Consolidated  Stock  and  Petroleum  Exchange,  through 
any  such  means,  apparatus,  device  or  contrivance  as  above  mentioned,  is  detrimental  to 
the  interest  and  welfare  of  this  Exchange,  and  is  hereby  prohibited.” 


February  25,  1891. 

“Resolved,  that  all  communication  between  this  Exchange  and  the  Consolidated  Stock 
and  Petroleum  Exchange,  or  any  part  of  the  building  thereof,  by  means  of  messengers 
or  clerks,  or  in  any  other  manner  directly  or  indirectly  is  detrimental  to  the  interest  and 
welfare  of  this  Exchange  and  is  hereby  prohibited. 

“Resolved,  that  the  Committee  of  Arrangements  be  authorized  and  instructed  to  enforce 
this  rule.” 


Dealing  for  Employes 

June  23,  1897. 

“That  the  taking  or  carrying  of  an  account  of  an  employe  of  a  member  of  the 
Exchange,  by  a  member,  or  firm,  members  of  the  Exchange,  without  the  written  consent 
of  his  employer,  is  an  act  detrimental  to  the  interest  and  welfare  of  the  Exchange.” 


RULES  AND  REGULATIONS 


507 


October  25, 1899. 

“Resolved,  When  a  member  has  contracted  to  borrow  money  on  collateral,  the  simple 
payment  of  the  interest  by  the  borrower  to  the  lender,  after  three  o’clock  p.  m.,  without 
actually  effecting  or  properly  endeavoring  to  effect  a  loan,  shall  be  held  to  be  an  evasion 
of  the  contract  and  an  act  detrimental  to  the  interest  and  welfare  of  the  Exchange,  and 
the  offending  member  may  be  proceeded  against  under  Section  8,  Article  XVII,  of  the 
Constitution.” 

Stock  List 


March  27,  1895. 

“Whenever  it  shall  appear  to  the  Committee  on  Stock  List  that  the  outstanding  amount 
of  any  security  listed  upon  the  Stock  Exchange  has  become  so  reduced  as  to  make  inad¬ 
visable  further  dealings  therein  upon  the  Exchange,  the  said  Committee  may  direct  that 
such  security  shall  be  taken  from  the  list  and  further  dealings  therein  prohibited.” 


Wire  Connections 
(To  take  effect  on  June  1,  1900:) 


May  9,  1900. 


“First. — That  hereafter  no  member  of  the  Stock  Exchange  and  no  firm  of  which  such 
member  is  a  partner,  shall  establish  telephonic  or  telegraphic  wire  connection  between  the 
office  of  such  member  or  firm  and  the  office  of  any  firm  or  individual  not  a  member  of  the 
Stock  Exchange  transacting  a  banking  or  brokerage  business,  unless  application  therefor 
shall  first  be  made  to  the  Committee  of  Arrangements,  and  shall  have  been  approved  by 
them. 

“Second.— Every  such  telephonic  or  telegraphic  wire  connection  which  shall  be  so 
authorized  by  the  Committee  of  Arrangements  as  well  as  all  existing  telephonic  or  tele¬ 
graphic  wire  connections  of  the  same  character,  shall  be  registered  with  the  Committee  of 
Arrangements,  who  shall  make  such  regulations  governing  the  matter  as  they  shall  deem 
necessary. 

“Third. — That  the  Committee  of  Arrangements  shall  have  power,  at  any  time,  in  their 
discretion,  to  order  any  connection  of  the  character  described  in  these  resolutions  to  be 
discontinued. 

“Fourth. — While  members  of  the  Stock  Exchange  may  connect  their  offices  by  wire 
with  the  offices  of  non-members,  in  accordance  with  the  provisions  of  these  resolutions, 
and  to  pay  for  such  wire  connection,  nevertheless  no  such  member  shall  directly  or  indi¬ 
rectly,  by  himself,  or  through  his  firm,  pay  the  cost  of  telegraph  operators  or  any  other 
expense  pertaining  to  non-members’  offices. 

“Fifth. — No  office  in  the  city  of  New  York  of  any  member  of  the  Stock  Exchange,  or 
of  any  firm  of  which  such  member  is  a  partner,  shall  be  connected  by  telegraphic  or  tele¬ 
phonic  wire  with  any  point  outside  of  the  city  of  New  York  unless  such  wire  shall  be 
furnished  by  a  telegraph  or  telephone  company  approved  by  the  Committee  of  Arrange¬ 
ments.  Said  Committee  shall  from  time  to  time  formulate  a  list  of  such  approved  com¬ 
panies. 

“Sixth.— Any  member  violating  any  provision  of  these  resolutions,  or  any  regulation 
made  by  the  Committee  of  Arrangements  in  pursuance  thereof,  shall  be  deemed  to  be 
guilty  of  an  act  detrimental  to  the  interest  and  welfare  of  the  Exchange.” 


XI 


LEGAL  STATUS  OF  THE  NEW  YORK 

STOCK  EXCHANGE 


JOHN  R.  DOS  PASSOS 


Author  of  “A  Treatise  on  the  Law  of  Stock  Brokers  and  Stock  Exchanges.” 


LEGAL  STATUS  OF  THE  NEW  YORK 

STOCK  EXCHANGE 

BY 

JOHN  R.  DOS  PASSOS 

Author  of  “A  Treatise  on  the  Law  of  Stock  Brokers  and  Stock  Exchanges.” 


AM  asked  to  give  an  analysis  of  the  legal  nature  of  the  New 
York  Stock  Exchange,  so  that  the  reader  may  clearly  com¬ 
prehend  the  relation  that  this  great  institution,  which  plays 
such  an  important  part  in  the  present  history  of  the  financial 
and  commercial  world,  bears  to  the  law,  its  members,  and 
the  public. 

The  Stock  Exchange  has  been  in  existence  since  1817.  If  its  members 
desire  it,  and  the  law,  statutory  and  adjudicated,  remains  unchanged,  it 
may  exist  perpetually. 

What,  in  law,  is  the  nature  of  the  Stock  Exchange  ?  An  elucidation  of 
this  subject  can  be  better  attained  by  first  determining  what  it  is  not. 

The  New  York  Stock  Exchange  is  not  a  corporation.  A  corporation  is 
a  creature  of  the  government  by  virtue  of  which  it  has  its  corporate  life. 
Its  charter  contains  the  nature  and  conditions  under  which  it  transacts  its 
business,  and  constitutes  a  contract  between  itself  and  the  State.  It  acts 
as  one  person  in  its  dealings  with  the  outside  world,  as  if  it  had  one  head,  one 
mind,  and  one  purpose.  Its  shareholders  are  not  liable  for  its  debts,  except 
in  certain  exceptional  cases.  It  has  perpetual  succession ;  that  is,  it  exists 
until  the  date  fixed  in  its  charter  for  its  dissolution  arrives.  Being  the 
creature  of  the  State,  it  is  liable  to  State  supervision  and  visitation. 
Membership  in  a  corporation  is  attested  by  the  ownership  of  shares 
of  stock,  which  are  offered  for  sale  to  the  public,  and  which  pass  from 


512 


THE  NEW  YORK  STOCK  EXCHANGE 


hand  to  hand  with  the  same  facility  as  negotiable  instruments.  The 
New  York  Stock  Exchange  is  not  a  joint  stock  association.  A  joint 
stock  association  is  very  similar  to  a  corporation  under  the  laws  of  New 
lrork,  but  there  is  this  important  difference,  which  deters  individuals  from 
combining  their  business  in  such  a  form  —  all  the  individuals  composing  the 
company  are  liable  as  partners.  Most  of  the  express  companies  are  joint 
stock  companies,  and  their  shareholders  are  all  liable,  individually,  for  the 
debts,  if  they  should  become  insolvent.  The  substantial  difference  between 
the  Stock  Exchange  and  a  joint  stock  company  is  this :  the  latter  exists  as 
a  business  enterprise  —  to  trade  and  gain  thereby ;  the  former  is  not  engaged 
in  business — it  furnishes  facilities  for  others  to  do  business.  Membership  in 
a  joint  stock  association  is  attested  by  shares  which  any  one  can  buy  and 
hold.  Membership  in  the  Stock  Exchange  is  a  personal  privilege,  not  trans¬ 
ferable  without  the  consent  of  the  Exchange.  It  might  also  be  remarked 
that,  under  the  existing  statutes  of  New  York,  the  difference  between  a  joint 
stock  company  and  the  Stock  Exchange  is  real,  but  extremely  fine. 

The  Stock  Exchange  is  not  a  partnership,  because  the  general  rule  of 
law  is  that  no  partnership  or  quasi  partnership  subsists  between  persons 
who  do  not  share  either  profit  or  loss,  and  who  do  not  hold  themselves  out 
as  partners.  As  I  must  repeat,  the  New  York  Stock  Exchange  is  not  engaged 
in  business ;  it  simply  affords  facilities  for  its  members  to  deal  in  stocks  and 
securities.  It  gains  nothing  from  the  business  of  its  members,  except  in  the 
shape  of  dues  and  fines  and  other  membership  exactions. 

Failing  to  come  within  the  definition  of  a  corporation,  joint  stock 
company,  or  partnership,  it  results  that  the  Stock  Exchange  is  nondescript, 
and  has  no  technical  name  or  place  in  the  law.  It  has  some  of  the  elements 
of  each  of  the  foregoing  bodies.  It  is  so  much  like  a  joint  stock  company 
that  it  might  be  taken  for  a  twin  brother.  It  closely  resembles  it  in  the 
following  particulars : 

First.  It  can  sue  or  be  sued  in  the  name  of  its  president  or  treasurer. 
If  it  were  a  partnership  it  would  be  necessary  to  join  all  the  members. 

Second.  It  has  perpetual  succession — that  is,  it  can  exist  (as  it  has 
existed  since  1817)  as  long  as  its  members  choose  to  keep  up  its  organiza¬ 
tion.  If  it  were  a  partnership  the  death  of  one  of  the  partners  would  dissolve 
it,  and  the  life  of  a  corporation  is  limited  by  the  terms  of  its  charter. 

Third.  New  members  may  be  admitted  into  the  body  without  causing 
its  disruption  or  dissolution.  If  it  were  a  partnership  the  introduction  of 
new  members  would  cause  a  dissolution  or  require  a  readjustment  of  its 
internal  conditions. 

The  New  York  Stock  Exchange  goes  on  in  its  business  life  without  regard 
to  change  in  its  membership  by  death  or  transfer  of  the  “  seats.”  Members 
go  and  members  come,  but  it  goes  on  forever. 


LEGAL  STATUS  OF  THE  STOCK  EXCHANGE 


513 


Fourth.  Like  the  members  of  a  joint  stock  company,  all  the  members 
of  the  Stock  Exchange  are  liable  for  its  debts,  obligations  or  liabilities. 

It  is  unlike  a  corporation  or  joint  stock  company  in  the  indicia  of 
membership.  The  latter  issue  stock  certificates  attesting  the  amount  of 
each  shareholder’s  interest  in  the  companies.  Stock  Exchange  membership 
is  the  personal,  unassignable  privilege  of  transacting  business  on  the  floor 
of  the  Exchange.  Each  member  has  a  “  seat  ”  which  gives  him  the  privilege 
of  standing  up  on  the  floor  to  transact  his  business  from  10  a.  m.  to  3  p.  m. 
And  another  important  distinction  is  made  by  Sec.  3  of  the  General  Corpo¬ 
ration  law  defining  a  Stock  Corporation,  which  is  as  follows:  “A  stock 
corporation  is  a  corporation  having  a  capital  stock  divided  into  shares,  and 
which  is  authorized  by  law  to  distribute  to  the  holders  thereof  dividends  or 
shares  of  the  surplus  profits  of  the  corporation.  A  corporation  is  not  a 
stock  corporation  because  of  having  issued  certificates  called  certificates  of 
stock,  but  which  are,  in  fact,  merely  certificates  of  membership,  and  which 
is  not  authorized  by  law  to  distribute  to  its  members  any  dividends  or 
shares  of  profits  arising  from  the  speculations  of  the  corporation.” 

The  Exchange  exists  under  a  written  constitution  and  by-laws,  which 
furnish  the  rules  for  the  government  of  its  officers  and  members.  Every 
individual  becoming  a  member  of  the  Exchange  is  presumed  to  assent  to  its 
rules,  and  they  govern  his  action  while  he  is  a  member.  It  is  not  necessary 
that  he  should  actually  sign  the  constitution  or  by-laws,  but  his  assent  to 
the  same  may  be  inferred  or  presumed  from  the  circumstances  of  each  case, 
and  especially  from  the  fact  of  admission  and  acting  as  a  member. 

As  to  the  limit  and  extent  of  the  rules  which  an  organization  like  the 
Stock  Exchange  can  adopt,  it  seems  to  be  established  that  its  members 
possess  the  right  to  make  such  regulations  for  the  government  of  the  body 
as  they  may  deem  proper,  providing  these  contain  nothing  unreasonable  or 
against  the  law  of  the  land  (which,  of  course,  includes  anything  immoral  or 
against  public  policy),  and  that,  with  these  necessary  limitations,  their  rules 
will  be  obligatory  and  enforceable.  Of  course  it  would  be  impossible  for  the 
Stock  Exchange  to  exist  without  rules  and  regulations,  and  therefore  the 
courts  have  been  very  liberal  in  construing  these  regulations,  with  the  view 
of  carrying  out  the  objects  of  the  organization.  In  some  few  cases  the  rules 
of  the  Exchange  have  been  found  to  be  contrary  to  law  or  public  policy,  but 
in  most  instances  they  have  been  sustained.  In  the  light  of  the  present 
legal  adjudications,  the  Exchange  possesses  the  fullest  control  of  its  mem¬ 
bers  in  the  exercise  of  their  vocations. 

As  has  been  intimated,  the  Exchange  is  in  no  wise  interested  in  the 
pecuniary  gains  or  losses  of  its  members,  the  sole  source  of  its  revenue 
being  derived  from  such  dues,  fines,  assessments  or  contributions  as  it  may, 
from  time  to  time,  collect  or  receive  from  them,  together  with  any  increase 


514 


THE  NEW  YORK  STOCK  EXCHANGE 


of  its  present  accumulations.  At  common  law,  the  legal  title  of 
the  personal  property  of  the  Exchange,  it  being  unincorporated,  is 
vested  in  all  its  members,  in  like  manner  as  the  title  to  partner¬ 
ship  property  is  vested  in  all  the  partners;  but,  unlike  the  relation 
of  partners,  a  member  of  the  Exchange,  or  his  legal  representatives, 
has  no  right  to  call  for  an  account  of  the  property  and  a  division  of  the 
same.  A  member  has  no  several  proprietary  interest  in  it,  or  a  right  to  any 
proportionable  part  of  it,  upon  withdrawing.  He  has  merely  the  enjoyment 
and  use  of  it  while  he  is  a  member ;  but  the  property  remains  with,  and 
belongs  to,  the  body  while  it  continues  to  exist — like  a  pew,  the  ultimate 
and  dominant  property  in  which  is  in  the  congregation,  and  not  in  the 
pew-holder ;  but  when  the  body  ceases  to  exist,  those  who  may  then  be  mem¬ 
bers  become  entitled  to  their  proportionate  share  of  its  assets.  When  an 
individual  is  elected  a  member  of  the  Exchange,  he  becomes  entitled  to  what 
is  commonly  called  a  “seat,”  and  such  a  proportionate  interest  in  the 
property  of  the  association  as  he  would  be  entitled  to  if  he  should  happen 
to  be  a  member  at  the  time  of  its  dissolution ;  and  that  interest  would  be 
found  by  dividing  the  amount  of  property  by  the  number  of  “seats”  then 
existing  after  deducting  debts  and  liabilities.  These  “seats,”  under  the 
constitution  of  the  Exchange,  are  transferable,  but  the  transferee  must  be 
approved  by  two-thirds  of  the  Committee  on  Admissions.  The  transfer, 
sale,  or  assignment  of  the  interest  of  a  partner  would  work  a  dissolution  of 
the  partnership;  but  in  the  present  instance  it  will  be  seen  that  the  trans¬ 
feror,  by  such  an  act,  does  not  disturb  or  affect  the  integrity  or  longevity 
of  the  general  organization.  He  simply  ceases  to  be  a  member  and  to 
have  any  legal  interest  or  concern  in  the  Exchange,  and  the  transferee, 
having  been  approved  by  the  proper  Committee  of  the  Exchange,  becomes 
invested  with  all  the  privileges,  duties,  and  attributes  of  membership. 
When  a  member  dies,  his  “seat”  may  be  sold  by  the  Committee  on 
Admissions,  who  satisfy  any  claims  of  the  members  and  pay  the  balance 
to  the  legal  representatives  of  the  deceased. 

If  the  Committee  on  Admissions  should,  for  even  arbitrary  reasons, 
refuse  to  approve  a  person  to  whom  a  member  has  bargained  to  sell  his 
“seat,”  the  latter  is  forced  to  continue  his  membership.  The  New  York 
Stock  Exchange,  in  this  respect,  is  like  a  club.  It  has  the  right  to  select 
its  own  society,  and  it  can  refuse  to  admit  applicants  without  deigning  to 
give  a  reason.  In  this  respect  the  powers  of  the  Exchange  are  almost 
despotic. 

In  respect  to  holding  real  estate,  the  Exchange  may  be  regarded  as  a 
joint  stock  association,  and  there  is  a  general  law  in  the  State  of  New 
York  authorizing  any  joint  stock  company  or  association,  in  the  name  of 
its  president,  to  purchase,  hold,  or  convey  such  real  estate  (1)  as  may  be 


LEGAL  STATUS  OF  THE  STOCK  EXCHANGE 


515 


necessary  for  its  immediate  accommodation  in  the  convenient  transaction 
of  its  business;  (2)  as  may  be  mortgaged  to  it  in  good  faith  to  secure 
loans  made  by  or  moneys  due  to  it;  or  (3)  as  it  may  purchase  at  sales 
under  judgments,  decrees,  or  mortgages  held  by  it.  Conveyances  shall  be 
made  to  the  president  of  the  association,  as  such,  and  he  and  his  successors 
may  sell,  assign  and  convey,  free  from  any  claim  of  shareholders,  or  any 
person  claiming  under  them.1 

As  to  the  liability  of  members  for  the  debts  of  the  Exchange,  no  case 
has  arisen  where  such  a  proposition  has  been  involved,  and  none  is  likely 
to  arise.  But  if  any  case  should  occur  in  which  the  Exchange  would  be 
unable  to  respond  to  any  debt  which  it  might  owe,  or  any  liability  which 
might  be  fixed  upon  it,  the  question  would  be  decided  upon  general  prin¬ 
ciples  of  law,  which  hold  that  members  of  unincorporated  companies  are 
regarded  as  partners  and  are  subject  to  the  whole  law  of  partnerships. 

Carrying  out  the  analogy  which  the  common  law  creates  and  main¬ 
tains  between  unincorporated  bodies  and  joint  stock  associations,  in  a  suit 
by  or  against  the  former  it  was  necessary  that  all  persons  composing  it 
should  be  made  parties,  but  the  legislature  of  New  York  has  remedied  this 
evil  and  has  provided  that  any  company  or  joint  stock  association  com¬ 
posed  of  not  less  than  seven  persons,  whether  owners  of  or  who  have  an 
interest  in  any  property,  right  of  action  or  demand,  jointly  or  in  common, 
or  who  may  be  liable  to  any  action  on  account  of  such  ownership  or 
interest,  may  sue  and  be  sued  in  the  name  of  the  president  or  treasurer 
for  the  time  being  of  such  joint  stock  company  or  association. 

In  respect  to  the  rules  and  regulations  which  it  can  make  for  its 
internal  government,  I  have  shown  that  the  Stock  Exchange  has  full 
power,  but  when  its  rules  are  brought  into  a  court  of  justice  for  construction 
it  must  submit  to  the  test  which  is  applied  to  the  by-laws  of  incorporated 
bodies.  They  will  be  declared  void  when  they  violate  the  constitution  or 
laws  of  the  United  States,  or  of  the  individual  states  where  the  associa¬ 
tions  exist,  or  the  common  law,  as  it  is  generally  accepted. 

Subject  to  the  above  limitations,  one  of  the  most  important  powers  of 
the  association  is  that  which  relates  to  the  suspension  or  expulsion  from 
membership.  It  is  settled  that  for  a  violation  of  the  rules,  after  a  hearing 
in  accordance  with  the  methods  prescribed  in  the  constitution  and  by-laws, 
any  offending  member  may  be  either  suspended  or  expelled  from  member¬ 
ship,  as  the  nature  of  the  act  justifies.  But  in  disciplining  its  members  the 
Exchange  cannot  act  arbitrarily.  It  must  give  the  accused  a  full  and  fair 
trial  in  accordance  with  its  rules  and  regulations. 

It  is  obvious  that  without  this  power  of  suspension  and  expulsion  the 

1Note.  But  to  avoid  any  possible  questions,  a  company  was  incorporated  under  the  laws  of  the 
State  of  New  York,  duly  empowered  to  hold  real  estate;  the  stock  of  the  company  being  exclusively  owned 
and  held  by  the  Stock  Exchange.  Incorporated  January  30,  1863. 


516 


THE  NEW  YORK  STOCK  EXCHANGE 


Stock  Exchange  could  not  be  successfully  maintained.  Without  the  right 
of  disciplining  its  members,  there  would  exist  such  confusion  and  disorder  as 
would  effectually  prevent  its  business  being  accomplished,  and  the  courts, 
in  examining  into  questions  where  such  discipline  has  been  inflicted,  either 
in  the  way  of  suspension  or  expulsion,  have  taken  great  pains  to  examine 
the  acts  in  the  light  of  the  objects  for  which  the  Stock  Exchange  exists. 

An  unincorporated  body  has,  at  common  law,  the  right  to  expel  a 
member  for  a  violation  of  its  express  rules  where  such  a  punishment  is 
attached  to  the  act,  and  such  an  association  has  the  inherent  power  to 
expel  its  members  in  the  following  cases  for  certain  acts,  although  they 
may  not  be  specifically  mentioned  in  its  by-laws: 

(1) .  If  an  offence  is  committed  which  has  no  immediate  relation  to  a 
member’s  corporate  duty,  but  is  of  such  an  infamous  nature  as  to  render 
him  unfit  for  the  society  of  honest  men  — such  as  offences  of  perjury, 
forgery,  or  other  felony.  But  before  such  an  expulsion  is  made,  it  is  neces¬ 
sary  that  there  should  be  a  previous  conviction  by  a  jury  according  to  law. 

(2) .  When  the  offense  is  against  his  duty  as  a  corporator ;  and  in  that 
case  he  may  be  expelled  on  trial  and  conviction  by  the  corporation. 

(3) .  When  the  offense  is  of  a  mixed  nature,  against  the  member’s  duty 
as  a  corporator,  and  also  indictable  by  the  law  of  the  land. 

Upon  this  question  of  disfranchisement  there  is  a  well-defined  dis¬ 
tinction  between  those  bodies,  corporate  or  unincorporated,  where  the 
members  exercise  a  personal  or  active  supervision  or  duty,  and  those  com¬ 
mercial  organizations,  instituted  mainly  for  gain,  where  the  members  do 
not  actively  participate  in  the  management,  but  merely  hold  certificates  of 
stock  which  are  transferable  by  assignment  and  delivery,  and  which  entitle 
each  holder  to  a  proportionate  share  of  the  assets,  profits,  and  earnings  of 
the  company.  In  the  former  case  the  personal  character  and  conduct  of 
the  member  may  be  of  the  highest  importance,  and  the  rule  stated  above, 
relating  to  the  power  of  expulsion,  ought  to  readily  apply.  But  in  the 
latter  case  the  personal  character  of  the  stockholder  is  of  no  particular 
concern,  and  consequently  it  seems  to  be  settled,  both  by  reason  and  legal 
precedent,  that,  generally,  a  member  cannot  be  disfranchised  and  deprived 
of  his  rights  in  the  corporate  property  for  acts  of  misconduct  disconnected 
with  the  corporate  business.  It  is  manifest  that  there  is  a  vast  difference 
between  a  membership  in  the  New  York  Stock  Exchange  and  the  ownership 
of  stock  in  one  of  our  great  railroads.  In  the  former  case  the  personal 
character,  standing,  and  responsibility  of  its  members  are  fundamental, 
but  in  the  case  of  the  shareholders  of  a  railroad  company,  as  they  do  not 
participate  in  the  active  business,  their  personal  character  is  of  little  or  no 
moment.  The  New  York  Central  or  Pennsylvania  Railroad,  which  are 
corporations,  do  not  and  cannot  investigate  or  regard  the  personal 


LEGAL  STATUS  OF  THE  STOCK  EXCHANGE 


517 


character  of  their  shareholders;  nor  do  the  express  companies,  which  are 
joint  stock  companies,  make  any  such  investigation.  So  the  important 
prerequisite  to  admission  to  the  Exchange  is  good  personal  character. 
This  is  essential  because  the  members  are  compelled  to  contract  with  and 
trust  each  other. 

Another  important  element  of  the  Stock  Exchange  is  the  rule  by  which 
the  members  have  a  lien  upon  the  “seat,”  or  the  proceeds  thereof,  of  an 
insolvent  member,  for  claims  or  demands  arising  out  of  transactions  made 
in  the  Exchange,  and  by  virtue  of  which  they  have,  to  the  extent  of  the 
money  value  of  the  “seat,”  a  preference  over  outside  creditors.  This  right 
to  a  preference  was  sustained  by  the  Supreme  Court  of  the  United  States 
many  years  ago,  and  it  is  the  accepted  law  to-day.  The  courts  hold  that 
a  provision  of  the  constitution  of  the  Exchange  that  a  member,  upon 
failing  to  perform  his  contracts  or  becoming  insolvent,  may  assign  his 
“seat”  to  be  sold,  and  that  the  proceeds  shall,  to  the  exclusion  of  his  out¬ 
side  creditors,  be  first  applied  for  the  benefit  of  the  members  to  whom  he  is 
indebted,  is  neither  contrary  to  public  policy  nor  in  violation  of  the 
bankrupt  act.  The  Exchange  is  a  voluntary  association,  and  the  mem¬ 
bers  have  a  right  to  associate  upon  such  terms  as  they  see  fit  to  pre¬ 
scribe,  so  long  as  there  is  nothing  immoral  or  in  contravention  of 
public  policy  in  the  terms  and  conditions  adopted.  No  man  is  under  any 
obligation  to  become  a  member  unless  he  sees  fit  to  do  so,  and  when  he 
subscribes  to  the  constitution  and  by-laws,  thereby  accepting  and  assent¬ 
ing  to  the  conditions  prescribed,  he  acquires  just  such  rights,  with  such 
limitations,  and  no  others,  as  the  articles  of  the  association  provide  for. 
A  “seat  ”  on  the  floor  is  not  a  matter  of  absolute  purchase.  Though  it  is 
property,  it  is  incumbered  with  conditions,  when  purchased,  without  which 
it  could  not  be  obtained.  It  never  is  free  from  the  condition  allowing  a 
preference,  and  that  rule  enters  into  and  becomes  an  incident  of  the 
property  when  it  is  created,  and  remains  a  part  of  it  into  whomsoever 
hands  it  may  come.  As  the  creators  of  this  right — this  property — take 
nothing  from  any  man’s  creditors  when  it  is  created,  no  wrong  is  done  to 
any  creditor  by  the  imposition  of  this  condition. 

The  foregoing  contains  a  resume  of  the  legal  nature  of  the  Exchange. 
There  are  many  interesting  and  difficult  questions  which  have  arisen  since 
its  creation  and  which  will  continue  to  arise.  The  fundamental  principle, 
however,  is  well  settled,  that  the  Exchange,  so  long  as  its  rules  and  regula¬ 
tions  are  not  inconsistent  with  law,  will  be  respected  by  the  courts,  nor 
will  the  latter  interfere  with  its  internal  operations  and  government  if  it 
remains  faithful  to  this  principle. 

Finally,  what  is  the  relation  of  the  Exchange  to  the  public?  A  word  is 
only  necessary  here.  For  some  purposes  the  Stock  Exchange  must  be 


518 


THE  NEW  Y011K  STOCK  EXCHANGE 


regarded  as  a  quasi  public  institution.  It  is  impossible  to  believe  that  an 
organization  like  it,  exercising  such  a  profound  influence  upon  the  finan¬ 
cial,  commercial,  and  investment  world,  should  be  only  amenable  in  forum 
conscientise.  In  a  proper  case  it  will  be  held  to  be  controlled  by  the  rules 
which  govern  other  public  or  quasi  public  bodies.  This  field,  however,  is 
almost  untouched,  and  I  do  not  venture  into  it,  because  I  am  speaking  of 
the  law  as  it  is,  and  not  endeavoring  to  make  it  out  upon  supposititious  or 
hypothetical  cases.  When,  and  if,  the  occasion  arises,  the  courts  will  be 
equal  to  the  task,  and  if  the  Stock  Exchange  at  all  times  arises  to  the  full 
performance  of  its  duty  to  the  public,  there  is  little  danger  of  any  conflict 
between  it  and  the  tribunals  of  justice. 


End  of  Volume  I 


■ 


nre  WmlSm  • 


Date  Due 

0C1 

v ^L 

r  r?j  — -fJ 

JAN  - 

G  1969 

Utb  \  f 

m 

PRINTED 

IN  U.  S.  A. 

Boston  College  Library 

Chestnut  Hill  67,  Mass. 

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